TMI Blog2024 (1) TMI 853X X X X Extracts X X X X X X X X Extracts X X X X ..... ngly, the Ground Nos. 1 to 3 raised by the revenue are dismissed. Applicability of TDS provisions in respect of provision for expenses made at the end of the year - assessee treated as assessee in default u/s 201(1) - HELD THAT:- Once there is a categorical finding that the assessee had not credited the corresponding liability for expenses to the account of the concerned vendors who had rendered the services, the payees become non-identifiable and hence there is no question of applicability of TDS provisions on the same. Merely because the assessee had voluntarily disallowed the expenses u/s 40(a)(ia) of the Act in the return, the same would not automatically enable the ld. AO to treat it as assessee in default u/s 201(1) of the Act and consequentially levy interest u/s 201(1A) of the Act. The provisions of section 40(a)(ia) and section 201(1) / 201(1A) of the Act are mutually exclusive. In any case, there is no estoppel against the statute. We find that the issue in dispute is squarely addressed by the Co-ordinate Bench of Delhi Tribunal in the case of HT Mobile Solutions Limited vs JCIT (OSD) [ 2023 (5) TMI 1212 - ITAT DELHI] to hold that the assessee cannot be treat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions; whereas not made on part of the similar other provisions. The tax auditor has also found and reported amounts of Rs. 2,53,57,043/- liable for TDS and held deductor in default for not making TDS on such amounts. 6. The appellant craves leave to add, alter or amend an of the grounds of appeal at the time of hearing. 5. The assessee has raised the following grounds of appeal in CO No. 176/Del/2016:- 1. That the learned Commissioner of Income Tax (Appeals) erred in confirming the levy of interest 201(1A) of the Income Tax Act amounting to Rs. 6,52,072/- (on TDS) in respect of provision for expenses of Rs. 2,53,57,043/- made by the appellant company in its books as at the close of the year on 31.03.2012 and which were reversed in the subsequent Financial Year, despite holding in Para 4.4 of his order that the assessee cannot be held to be an assessee in default u/s 201(1) of the Income Tax Act, 1961. 6. The Ground Nos. 1 to 3 raised by the revenue are challenging the action of the ld. CIT(A) holding that the payments made to doctors would be covered by TDS provisions in terms of section 194J of the Act as against section 192 of the Act done by the ld. AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The assessee company in the revised computation of income filed before the ld. AO along with the revised return filed on 22.8.2013, which is well within the time limit prescribed u/s 139(5) of the Act, had disallowed voluntarily a sum of Rs 2,53,57,043/- on the year end provision of expenses u/s 40(a)(ia) of the Act. The said expenses were disallowed u/s 40(a)(ia) of the Act in the revised return on the ground that the said expenditures were not subjected to deduction of tax at source. The case of the assessee is that these are provision made for certain business expenses on actual basis where the services are rendered by the respective parties but the bills were raised by them in the next financial year. Accordingly, the assessee had booked those expenses on provision basis in accordance with mercantile system of accounting regularly followed by the assessee and had reversed the very same expenditure on 1st April of the next financial year. It was submitted that on receipt of actual bills from the concerned vendors, the due tax is deducted at source and payments made to them. It was submitted that as on 31st March, the payees are not identifiable and hence the assessee could not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ute. We find that the issue in dispute is squarely addressed by the Co-ordinate Bench of Delhi Tribunal in the case of HT Mobile Solutions Limited vs JCIT (OSD) in ITA Nos. 2475 2476/Del/2022 for Asst Years 2013-14 2014-15 respectively dated 22.5.2023 wherein it was held as under:- 4. We have heard the rival submissions and perused the material available on record. The case of the Revenue is that the assessee had made year-end provisions for expenses amounting to Rs. 86, 12,471/- on which tax was not deducted at source. The assessee was treated as 'assessee in default' in the sum of Rs. 8,61,247/- u/s 201(1) of the Act and interest of Rs. 8,00.548/- u/s 201(1A) of the Act. The Id. AO observed that the provision had been made on ad hoc basis in respect of various expenditures by the assessee. On the contrary, the assessee's case is that payees of these expenses are not identifiable and, hence, tax could not be deducted at source. The assessee also submitted that invoices for these expenses were received by the assessee company in the next financial year with the date falling in next financial year. Hence, these year-end provisions made by the assessee were rever ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Central Government within the prescribed time. We find that this is a consistent practice followed by the assessee on year-to-year basis. The fact of reversal of these expenses in the succeeding year are enclosed in pages 23 to 29 of the paper book. This is not disputed by the revenue before us. The fact of the assessee deducting the tax at source in the succeeding year and remitting the same to the account of the Central Government on 02.05.2013, 30.05.2013, 05.07.2013 and 06.09.2013 are enclosed are enclosed in pages 33-37 of the paper book. We find that the issue in dispute is no longer res integra in view of the decision of the Hon'ble jurisdictional High Court in the case of UCO Bank vs. Union of India reported in 369 ITR 335 wherein it was held as under:- 18. In terms of Section 194A of the Act, the petitioner would, in the normal course, be obliged to deduct tax at source in respect of any credit or payment of interest on deposits made with it. However, in the present case, the question that needs to be addressed is whether Section 194A of the Act contemplates deduction of tax in a situation where the assessee is not ascertainable and the person in whose na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and there is no other assessee. 21. It is relevant to note that there is no assessee to whom interest income from the deposits in question can be ascribed; no person can file a return claiming the interest payable by the petitioner as income. The necessary implication of this situation is recovery of tax without the corresponding income being assessed in the hands of any assessee. The ultimate recipient of the funds from the FD would also not be able to avail of the credit of TDS. It is apparent that in absence of an ascertainable assessee the machinery of recovering tax by deduction of tax at source breaks down because it does not aid the charge of tax under Section 4 of the Act but takes a form of a separate levy, independent of other provisions of the Act. This is, clearly, impermissible. 22. The impugned circular proceeds on an assumption that the litigant depositing the money is the account holder with the petitioner bank and/or is the recipient of the income represented by the interest accruing thereon. This assumption is fundamentally erroneous as the litigant who is asked to deposit the money in Court ceases to have any control or proprietary right over those fun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on towards a tax liability of another, even where the person does not acknowledge that any sum is payable. This, in our view, is contrary to the scheme of provisions relating to collection of TAS under the Act. 23. It is also not disputed that TLME had not claimed royalty payable from the Assessee and, concededly, no royalty for the period has been paid either. In the circumstances, we are unable to accept that any income had accrued or arisen or deemed to have accrued or arisen, which is chargeable to tax in the hands of TLME. It is not disputed that the agreement dated 1st January, 1997 was not acted upon at the material time. In the absence of any income chargeable to tax arising on account of royalty in the hands of TLME at the material time, the question of withholding TAS would not arise. 24. In our view, reliance placed by the Revenue on the decision of Transmission Corpn. of AP Ltd. (supra) is wholly misplaced. In that case, the Supreme Court had clarified that where payments of any amount(s) on account of trade payables (i.e. payments in the nature of Revenue) were made, the payer was obliged to deduct tax at the relevant rates on the entire amount paid and it wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial footing and at the Extraordinary General Body Meeting of the managed companies held subsequently, the private companies floated by the assessee were accepted as the managing agents in place of the Assessee. The Income Tax Officer as well as the Appellate Assistant Commissioner had concluded that larger commission had accrued during the relevant period and was thus assessable to tax. The Tribunal accepted the Assessee's contention and held that the income on account of larger commission had neither accrued nor was paid to the Assessee and, thus, was not chargeable to tax. The Bombay High Court agreed with the Tribunal, however, certified the case as fit under Section 66A(2) of the Income Tax Act, 1961, to be considered by the Supreme Court. The Supreme Court referred to the earlier decision of the Bombay High Court in CIT v. Chamanlal Mangaldas Co. [1956] 29ITR 987 (Bom.), which was approved by the Supreme Court in CIT v. Chamanlal Mangaldas Co. [1960] 39 ITR 8 (SC) and held as under: - .....Income-tax is a levy on income. No doubt, the Income-tax Act takes into account two points of time at which the liability to tax is attracted, viz., the accrual of the inc ..... 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