TMI Blog2021 (12) TMI 460X X X X Extracts X X X X X X X X Extracts X X X X ..... e said reasoning is wholly unjustifiable, as could be seen from the material available on record, in the provisions made, payees were not identified. The genuiness of the provision cannot be determined on the basis of the figures. The cryptic reasoning of the Tribunal is not suffice to support the findings arrived at. It is trite that proper reason is the essential ingredient of a valid order. It is ex-facie apparent that the contention of the assessee inasmuch as non-identification of the payees in the provisions and the disallowance of deduction expenditure under Section 40(a)(ia) has not been rightly appreciated by the Tribunal. In this scenario, the judgment of the Hon'ble Apex Court in the case of Shree Choudhary Transport Compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luru [ Tribunal for short] relating to the assessment years 2012-13 and 2013-14. 2. The appeal was admitted by this Court to consider the following substantial question of law: Whether the order of the Tribunal is perverse in law as it failed to appreciate that the provisions were created on head-wise expenses and not with reference to any particular party and consequently such amounts of provisions did not attract the provisions of Section 194C, 194-I, 194-J and 194-H of the Act? 3. The assessee is engaged in the business of manufacturing/dealing in tractors, trailers, bus chasis, road machinery and trading in construction equipment and also provides software, product design and other support services. The assessee created prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... diture was claimed by the assessee during the relevant assessment years under these provisions. Returns filed by the assessee for the assessment years in question and the audit report in Form No.3C were referred. Further referring to the order of the Tribunal in M/s. TE Connectivity India Pvt. Ltd., V/s. Income-tax Officer (LTU)(TDS), Bangalore ITA No.3/Bang/2015, [D.D. 25.05.2016], it was argued that in identical circumstances, the Tribunal placing reliance on the ruling of this Court in the case of Karnataka Power Transmission Corporation Ltd., V/s. Deputy Commissioner of Income Tax [TDS] [(2016) 383 ITR 59 (Karn)], has categorically held that the assessee-company therein is not liable to deduct tax in the hands of the payee. However, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which attracts TDS under Sections 194C, 194H, 194I and 194J. The Co-ordinate Bench of this Court in the case of Karnataka Power Transmission Corporation Ltd.,2 has considered similar issue wherein the appellants therein in their profit and loss account treated the amount of provision as expenditure to arrive at profit. However, in the returns of income filed for the said assessment years, no expenditure was claimed, corresponding reversal entries were made in the books of accounts during the financial year 2007 for the assessment years 2005-06 and 2006-07 indicating that the subject amounts of provision towards contingent interest would never be paid. Similarly for the financial year ending on 31.03.2007, a similar provision towards conting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the end of the accounting year are reversed in the beginning of the next year. No payees are identified. The exact amount of liability also cannot be quantified. The provisions are made merely on for Management Information System. In our considered opinion, liability to deduct tax at source does not arise. In identical circumstances, the Hon ble Tribunal in the case of M/s. Bosch Ltd., vs. ITO in ITA No.1583/Bang/2014 dated 01.03.2016, to which one of us i.e., the Accountant Member is the author of the order, held as follows:- xxxxxxx 9. The facts of the said case would indicate that the provisions made at the end of the accounting year were reversed in the beginning of the next year and no payees were identified including the exac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venue unless the material aspects are considered with respect to Section 40(a)(ia) of the Act read with Sections 194C, 194H, 194I, 194J relevant Sections under which TDS was required to be deducted by the assessee. These factors necessarily requires to be addressed by the Tribunal keeping in mind the provisions of the Act as well as the legal principles enunciated by the Hon ble Courts. If the deduction is not claimed for the expenditures made in the provision even in the return submitted and the same is offered to tax in the subsequent year after reversing the entries pursuant to the receipt of the bills/invoices by the payees, the matter has to be analysed having regard to, whether income has accrued to the payees to deduct tax at sourc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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