TMI Blog2021 (2) TMI 1040X X X X Extracts X X X X X X X X Extracts X X X X ..... to allow the position to be changed in subsequent year. As similar provisions were made in earlier years as well as subsequent years by the assessee and the TDS was not deducted on the provisions. However, the Department has not made any additions with regard to the provisions made during the years in which returns of income were selected for scrutiny assessment. Therefore, the first substantial question of law on the analogy of the principles laid down by the Supreme Court in the aforesaid decision is answered against the revenue and in favour of the assessee. Addition u/s 35D - expenditure incurred towards cost reduction initiative for sustained profitability - CIT-A deleted the addition - tribunal has affirmed the aforesaid find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the provisions of Section 194H would apply when the payments are made to the agents or credited to the agents' accounts whichever is earlier and not when the payment is credited to the provisions account even though the Explanation (iv) of Section 194H states that where any income is credited to any account, whether called suspense account or by any other name, in the books of accounts of the person liable to pay such income, such crediting shall be deemed to be income to the account of the payee and the provisions of this Section shall apply accordingly? 2. Whether, on the facts and in the circumstances of the case, the Tribunal is justified in law by holding that the consultancy charges paid cannot be treated as Capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal (hereinafter referred to as 'the Tribunal' for short). The Tribunal, by an order dated 07.03.2014, dismissed the appeal preferred by the revenue. In the aforesaid factual background, the revenue is in appeal before us. 4. Learned counsel for the revenue, while inviting the attention of this Court to Explanation (iv) to Section 194H of the Act, submitted that the assessee had debited an amount of ₹ 6,46,11,000/- to profit and loss account pertaining to provision towards commission and since the assessee failed to comply with the provisions of Section 194H, no provision for deduction of tax at source was made. Therefore, the Assessing Authority, rightly invoked the provisions of Section 40(a)(ia) of the Act. It is also su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CER' (2020) 426 ITR 0289 (SC), 'THE DIRECTOR PRASAR BHARATI Vs. COMMISSIONER OF INCOME TAX' (2018) 403 ITR 0161 (SC) AND 'PINGLE INDUSTRIES LTD. Vs. COMMISSIONER OF INCOME TAX' (1960) 40 ITR 0067. 6. On the other hand, learned counsel for the assessee submitted that assessee has debited a sum of ₹ 14,84,11,000/- as sales commission out of which a sum of ₹ 6,46,11,000/- has been credited to a provision account which was part of his commission. It is pointed out that no part of said sum of ₹ 6,46,11,000/- was credited to any of the agent's accounts maintained with the assessee inasmuch as the amount was payable on matching concept and being in relation to receipts offered. It is further submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be drawn as the assessee could not perform the impossible. It is further submitted that in light of 1st proviso to Section 40(a)(ia) of the Act which was inserted with effect from 01.04.2010, the disallowance under Section 40(a)(ia) of the Act is not required. It is further submitted that so far as issue with regard to disallowance of consultancy charges is concerned, while considering the nature of expenditure to the capital or revenue the test to be applied is also whether there is any new asset being created or whether it is giving any enduring benefit and the tribunal has recorded a finding in favour of the assessee as the tribunal has found that no new asset has come into existence and the study was conducted only for improving the sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee and the TDS was not deducted on the provisions. However, the Department has not made any additions with regard to the provisions made during the years in which returns of income were selected for scrutiny assessment. Therefore, the first substantial question of law on the analogy of the principles laid down by the Supreme Court in the aforesaid decision is answered against the revenue and in favour of the assessee. 9. So far as second substantial question of law is concerned, the Commissioner of Income Tax (Appeals) has deleted the addition holding that the expenditure was incurred towards cost reduction initiative for sustained profitability and the provisions of Section 35D are not applicable to the case as it is not the case of pre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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