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M/s Apollo Tyres Limited Versus Deputy Commissioner of Income Tax, TDS Circle, Gurgaon.

Year end provision - Order u/s 201 and 201(1A) - non deduction of tds - whether the assessee can be said to be in default for not deducting the TDS in respect of a provision made at the year end? - Held that:- ITAT, Chennai Bench in the case of Dishnet Wireless Ltd. (2015 (7) TMI 778 - ITAT CHENNAI ) has held that in the case of the year end provision where the party/payee is identifiable, the TDS is to be deducted and where the party is not identifiable, no TDS is deductible. Similar view has b .....

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ce is a pre-requisite condition so as to make the provision for Chapter XVII-B workable. Tax deducted at source is considered to be tax paid on behalf of the person from whose income the deduction was made and, therefore, the credit for the same is to be given to such person. When the payee is not identifiable, to whose account the credit for such TDS is to be given. - Thus we set aside the orders of authorities below on this point and restore the matter to the file of AO for both the years .....

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he above facts. Needless to mention that he will allow adequate opportunity of being heard to the assessee while giving effect to our order. - ITA No.3215/Del/2015 & 3216/Del/2015 - Dated:- 10-1-2017 - SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER For The Appellant : Shri Deepak Chopra, Advocate. For The Respondent : Shri A.K. Saroha, CIT-DR. ORDER PER G.D. AGRAWAL, VP :- These two appeals by the assessee for the assessment year 2010-11 and 2011-12 are directed a .....

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). 2. That the order passed by ld.CIT(A) is perverse in law (as regards it gives no factual finding in ascertaining true nature of individual transaction and is silent about the details and evidences furnished by Appellant) when the complete details were filed during appellate proceedings. 3. That the ld.CIT(A)/AO erred on facts and in law in holding that tax ought to have been deducted at source on provision for conference expenses amounting to INR 4,00,00,000/-. 3.1 That the ld.CIT(A) erred on .....

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at the ld.CIT(A) has erred on facts and in law in holding that tax ought to have been deducted at source on provision for business development initiative expenses amounting to INR 1,25,61,825/-. 4.1 That the ld. CIT(A)/AO erred on facts and in law in not appreciating that expenses relating to business development initiative were not ascertainable at the time of finalizing the books of accounts for the relevant assessment year and thus, as such tantamount to ask appellant to perform impossible ac .....

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00,000/-. 5.1 Without prejudice to the above, the ld.CIT(A)/AO erred on facts and in law in treating appellant as an assessee in default when the provision was reversed/adjusted on the basis of actual expenditure incurred in the subsequent year and tax was deducted on actual expenses booked in accounts whereof resulting in double taxation. 6. That the ld.CIT(A)/AO grossly erred on facts and in law in holding that tax ought have been deducted at source on provision for product publicity expenses .....

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aid to the foreign dealers on cost to cost basis as reimbursement. 7. That the ld.CIT(A)/AO erred on facts and in law in holding that tax ought to have been deducted at source on provision of INR 19,64,000/- created on commission paid to domestic selling agents. 7.1 Without prejudice to the above, the ld.CIT(A)/AO erred on facts and in law in treating appellant as an assessee in default when the provision was reversed/adjusted on the basis of actual expenditure incurred in the subsequent year an .....

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ual expenditure incurred in the subsequent year and tax was deducted on actual expenses booked in accounts whereof resulting in double taxation. 9. That the ld.CIT(A)/AO erred on facts and in law in levying interest under section 201(1A) of the Act. 10. That the ld.CIT(A)/AO erred on facts and in law in charging an ad-hoc rate for computing alleged liability on deducting tax at source in respect to the year end provision. 3. At the time of hearing before us, it was admitted by both the sides tha .....

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s were furnished by the assessee. Thereafter, the Assessing Officer passed the order u/s 201 and 201(1A) holding that it failed to deduct the TDS in respect of provisions made under several heads of income amounting to ₹ 15,07,25,637/-. Accordingly, the demand u/s 201(1) was raised at ₹ 1,04,02,197/- and also interest u/s 201(1A) at ₹ 38,48,924/-. The details of the provisions of various heads of income and alleged nondeduction of tax is as under :- Head of provision Amount Dat .....

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9,64,000 31.03.10 1,96,400 @ 10% 37 72,668 Commission to selling agents - clearing & forwarding 3,85,812 31.03.10 38,581 @ 10% 37 14,275 Total 15,07,25,637 1,04,02,497 38,48,924 5. On appeal, learned CIT(A) sustained the same. Hence, this appeal by the assessee. 6. At the time of hearing before us, it is submitted by the learned counsel that at the end of the financial year 2010, the assessee made provision for various expenses. He submitted that next year when the actual expenditure was inc .....

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nder various heads of income. In support of this contention, he relied upon the following decisions :- (i) Dishnet Wireless Ltd. Vs. DCIT - [2015] 60 taxmann.com 329 (Chennai-Trib.). (ii) Industrial Development Bank of India Vs. ITO - [2007] 293 ITR (AT) 267 (Mumbai). 7. Learned DR, on the other hand, stated that when the assessee made the provision, he claimed the deduction for the expenditure in this year. Provision can be made only when the liability is an ascertained liability. Therefore, th .....

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pon the decision of ITAT, Cochin Bench in the case of Abad Builders (P) Ltd. Vs. ACIT - [2014] 43 taxmann.com 128 (Cochin-Trib). 8. We have carefully considered the submissions of both the sides and have perused the material placed before us. The limited dispute before us is whether the assessee can be said to be in default for not deducting the TDS in respect of a provision made at the year end. Learned DR has relied upon the decision of Cochin Bench of ITAT in the case of Abad Builders (P) Ltd .....

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of time, that the said TDS liability would arise even if the amount is credited to any account whether called suspense account or called by any other name. In the instant case, the ld.CIT(A) has observed that the assessee s claim for deduction of very same amount in the succeeding year was allowed, since the assessee had deducted tax at source thereon in that year. This fact shows that the assessee is accepting the position that the provision for expenses so made is susceptible for deduction of .....

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provided under the head provision for expenses . Hence, we reject the contentions of the assessee that the TDS provisions shall not apply to the provision for expenses. 9. Learned counsel for the assessee, on the other hand, relied upon the decision of ITAT Mumbai Bench in the case of Industrial Development Bank of India (supra), wherein ITAT held as under :- Held, allowing the appeal, that as on March 31 of the year, the assessee had a liability for interest accrued but not due because interest .....

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ayee was not known at the stage of provision for interest accrued but not due being made. The fiction embodied in the Explanation was only applicable in situations in which tax deduction liability is sought to be evaded by crediting interest to an account other than that of the recipient of interest. The bonds being transferrable by simple endorsement and delivery and the relevant registration date being a date subsequent to the closure of books of account, the assessee could not have ascertaine .....

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wherein the ITAT held as under :- 24. Now coming to the issue of year-end provisions, the contention of the assessee is that it is engaged in various services like address verifications, credit certification, content development etc. The assessee claims that provisions are made on estimation basis since it is not identifiable as to what amount has to be paid to the service providers. In case of new service connections, the assessee has to necessarily verify the customers' address and identif .....

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etc. From the order of the CIT(Appeals) it appears that the assessee also has to pay the various other service providers for providing value added service to its subscribers like daily horoscopes, astrology, songs, wall paper downloads, cricket scores, etc. Admittedly, the assessee made arrangement with other service provides for providing these kind of value added services. There may be justification with regard to the expenditure for availing the services of identification and verification fo .....

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d services like daily horoscopes, astrology, customer acquisition forms are all from specific service providers and these value added services are monitored by system. Therefore, even on the last day of financial year, the assessee could very well ascertain the actual quantification of the amount payable and the identity of the payee to whom the amount has to be paid. To that extent, the contention of the assessee that the payee may not be identified may not be justified. The exact facts need to .....

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unt payable also could not be ascertained, the assessee may not require to deduct tax in respect of that provision. However, in case the payee is identified and quantum is also ascertainable on the last day of the financial year, this Tribunal is of the considered opinion that the assessee has to necessarily deduct tax at source. Since the details are not available on record, the orders of the lower authorities are set aside and the issue of year-end provision is remitted back to the file of the .....

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s to be made at the time of payment or the credit of the amount to the account of payee. However, as per provision of Section 194C(2), the tax is to be deducted even if the amount is not credited to the account of the payee but to the suspense account. Section 194C(2) reads as under :- 194C(2). Where any sum referred to in sub-section (1) is credited to any account, whether called Suspense account or by any other name, in the books of account of the person liable to pay such income, such crediti .....

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for expenses. However, the ITAT, Chennai Bench in the case of Dishnet Wireless Ltd. (supra) has held that in the case of the year end provision where the party/payee is identifiable, the TDS is to be deducted and where the party is not identifiable, no TDS is deductible. Similar view has been taken by the ITAT Mumbai Bench in the case of Industrial Development Bank of India (supra). After considering the scheme of Chapter XVII-B with regard to tax deduction at source, we agree with the views exp .....

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