TMI Blog2016 (11) TMI 668X X X X Extracts X X X X X X X X Extracts X X X X ..... ascertained mercantile liability. Even in case of mercantile liability, Section 40a(ia) clearly mandates that the expenditure cannot be allowed in the absence of corresponding TDS payment in Government treasury. - Decided against assessee - ITA No. 1084/Ahd/2013 - - - Dated:- 14-10-2016 - Shri R. P. Tolani, Judicial Member Assessee by : Shri Ketan Jagirdar, AR Revenue by : Smt. Sonia Kumar, Sr DR ORDER This appeal by the assessee is directed against the order of the Learned Commissioner of Income Tax (Appeals)-IV, Surat dated 28.02.2013 for Assessment Year 2009-10. 2. One issue is raised by following grounds :- The Id C.I.T.(Appeals) has erred in upholding the decision of the Assessing Officer that provision of section 40a (ia) is applicable on year end provisions of commission expense of ₹ 26 lacs as TDS is. not deducted inspite of following reasons: i) The assessee is following mercantile basis of a accounting. Therefore, he is required to follow matching principle i.e. All expenditures relevant to accounted sales/income should be accounted in same year and vice versa, whether bills of relevant parties are received or not. Where ever bill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount stipulated in Section 194H, the assessee should have done TDS on this commission amount. The AO also observed that the accounting practice of the assessee of debiting the amount of ₹ 26,00,000/- at the end of the year and crediting the same amount back on the first day of the next FY by passing reverse entry shows that the assessee diverted his income which should have been taxed in the year under consideration. The AO invoked the provisions of Section 40a(ia) for disallowing the expenses of ₹ 26,00,000/- under the Income-tax Act. 3.3 Aggrieved, the assessee preferred first appeal where it was contended that the Hon ble Mumbai Tribunal in case of Industrial Development Bank of India V/s. ITO (2007) 293 ITR 267 has held that the IDBI did not have any liability to deduct tax at source in respect of provision of interest accrued but not due if the recipients were not identifiable. The assessee submitted that similar decision was given by ITAT Mumbai, in the case of Mahindra Mahindra V/s. DCIT in ITA No. 8597/MUM/2010. The assessee further pointed out that the Hon'ble CBDT had also duly considered the issue and had issued a clarification to Tata Iron and Ste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The case laws relied upon by the appellant in support of his contention that provision of sec. 40a(ia) was not attracted in his case as the identity of the parties to whom payments had to be made was not known to him does not help his cause. In the cases relied upon by the appellant, the issue pertained to provisions made for interest expense incurred for the year which was quantifiable but only provisions could be made as these had not fallen due for payment and therefore neither paid nor credited to the account of the receiver. It was under those circumstances that the Courts held that there was no liability to deduct tax. The letter to TISCO given by CBDT is also in respect of Interest on Deep Discount Bonds. As against this, in the case of the appellant the expense is neither accrued nor quantifiable and hence the provision itself is inadmissible for deduction - whether TDS made or not. If, as has been mentioned earlier, it is argued that the amount is quantifiable and accrued, then the details would be known to the appellant and the same should be credited to the commission agent's account and TDS made. 5.3 During the course of appeal proceedings, a reconciliation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e disallowance of Provision for commission payable of ₹ 26,00,000/- made by the AO is, therefore, upheld. 4. The ld. Counsel for the assessee relied on the judgments of IDBI (supra), Mahindra Mahindra (supra) and CBDT clarification dated 05.07.1996 and contends that the practice followed by the assessee has been accepted by the Department in past year; therefore, making a provision on the estimate basis on the sales effected by the assessee, the commission become an ascertained liability and was allowable as business expenditure. The deduction of TDS become impossible as the exact names, amount of commission and TDS payable to each party was not known. Therefore, the assessee was not in a position to pay the TDS. This situation of impossible cannot be held against assessee to deny the claim of expenditure. Once the Department has accepted this methodology, there is no justification in the disallowance of expenditure. 5. The ld. Sr. DR, on the other hand, vehemently contends that the assessee himself has admitted that the liability in question was unascertainable as the names, amount of commission and TDS payable thereon was not known to the assessee. Unless the as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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