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TMI Blog2025 (4) TMI 1610X X X X Extracts X X X X X X X X Extracts X X X X ..... payments and the appeals in I.T.A. Nos.2202, 2204, 2212 & 2214/Chny/2024 for AYs 2016-17, 2017-18, 2015-16 & 2018-19 pertain to non-resident payments. 2. Since issues raised in these appeals are similar based on the same identical facts, with the consent of the both the parties, we proceed to hear the appeals together and pass consolidated order for the sake of convenience. 3. First, we shall take-up appeal relating to resident-vendors in ITA No. 2211/Chny/2024 for AY 2015-16 as lead case for adjudication. 4. The assessee raised 8 grounds of appeal amongst which, the only issue emanates for our consideration as to whether the ld. CIT(A) is justified in confirming the action of the Assessing Officer [TDS Officer] in treating the assessee as "assessee in default" under section 201(1) of the of the Income Tax Act, 1961 ["Act" in short] and levying interest under section 201(1A) of the Act in the facts and circumstances of the case. 5. Brief facts relating to the case are that the assessee is a company and engaged in the business of software development and maintenance. A survey was conducted on 21.02.2022 under section 133A(2A) of the Act at its office situated at Menon Eternity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision. He further submits that taxes were deducted at the time when the actual invoice is received from the vendors in the subsequent year. The ld. AR referred to details of provisions made for the year under consideration and argued that the actual expenses amount i.e. actual invoice value gets accounted ultimately over two years. Further, he drew our attention to the said table and submits that the assessee made provision for expenses as on 31.03.2015 to an extent of Rs..27,87,89,271/- and disallowed 30% thereon of Rs..8,36,36,781/- by the assessee of its own for computing the total income. Again, the entire provision was reversed as on 01.04.2015 and claimed expenses on receipt of invoice from the vendors to an extent of Rs..24,76,17,968/- and remaining accounted for next subsequent assessment year 2016-17. 7. The ld. AR referred to order under section 201/201(1A) of the Act at para 8.8 and argued that there was no short deduction of tax and thus, interest for TDS payable under section 201(1A) of the Act is not required/justified. The ld. AR drew our attention to the order of Bangalore Bench of ITAT in the case of Biocon Ltd. v. DCIT 152 taxmann.com 55 (Bang), by referring to p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce is to debit 'Provision for Expenses' account with the payment made in the succeeding year. Since the expenses are provided for on estimated basis, four possible situations shall arise in the succeeding year, when payment is made. We explain the same by way of illustrations:- Let us assume that provision for expenses is made for Rs. 1000/- towards a particular expense as on 31.3.2012 and the above said amount was determined on estimated basis. (a) Situation I:- In the subsequent year, the assessee receives bill for Rs. 1000/-. Accordingly, when the payment is made "Provision for expenses" account shall be debited with Rs. 1000/-. In this situation, the Provision for expenses a/c will show NIL balance after the payment. There will not be any impact on the Profit and Loss account of the succeeding year. (b) Situation II:- In the subsequent year, the assessee receives bill for Rs. 1,200/-, meaning thereby, the provision created was short by Rs. 200/-. When the payment is made, the Provision for expenses account shall be debited with Rs. 1000/- and the concerned expenses account shall be debited with remaining amount ofRs.200/-. In this situation also, the Provision for expense ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a credit balance of Rs. 250/- in the Provision for Expenses account. This remaining credit balance will be transferred to the Profit and Loss account. Accordingly, the Provision for expenses account will show NIL balance and there will be an impact on the Profit and Loss account of the succeeding year by way of income of Rs. 250/-." In the present case also, the assessee received invoices from the vendors to an extent of Rs..24,76,17,968/- only, meaning thereby the provision created was in excess by Rs..3,11,71,303/- [Rs..27,87,89,271 - Rs..24,76,17,968/-]. When the payment is made, the provision for expenses account shall be debited with Rs..24,76,17,968/-, which will leave a credit balance of Rs..3,11,71,303/- in the provisions for expenses account. This remaining credit balance is transferred to profit and loss account. Accordingly, the provision for expenses account is shown NIL balance and there is impact on the profit and loss account of the succeeding year by way of income of Rs..3,11,71,303/-. 12. We find the Assessing Officer held that there was short deduction of TDS on the excess provision. Accordingly, the short deduction is calculated to an extent of Rs..24,05,810/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the succeeding year. (d) Payment has not yet been made in the succeeding year, even though the liability is acknowledged. However, the TDS was deducted/paid in the succeeding year. (e) Payment has not yet been made in the succeeding year, even though the liability was acknowledged. However TDS was not deducted in the succeeding year. Under Scenario (a) and (b) above, if the assessee has deducted tax at source at the time of making payment, then the provisions of sec.201(1) will not be attracted as held by us in the preceding paragraphs. However, since there was delay in deduction and payment of TDS amount, the assessee would be liable to pay interest u/s 201(1A) of the Act. We shall discuss the same in the ensuring paragraphs. 10.1 The first scenario is that the actual payment made is more than the amount of provision made. The TDS was deducted at the time of credit or at the time of making actual payment. Since yearend provision was made on 31.3.2012 in this case, the date on which TDS was deductible shall be 31.3.2012. The assessee shall be liable to pay interest from that date to the date of actual deduction/payment as per the provisions of sec. 201(1A) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to an extent of Rs..24,76,17,968/-. Therefore, the liability to deduct TDS shall be on the amount of actual payment only. In this scenario, following the order of Bangalore Tribunal in the case of Biocon Ltd. v. DCIT (supra), we hold the tax liability upon the recipient will be on the amount to extent of Rs..24,76,17,968/- and accordingly, the TDS liability also on the said amount actually paid and interest under section 201(1A) of the Act is liable to be paid on Rs..24,76,17,968/-. Therefore, the sum of Rs..10,45,766/- calculated as per Annexure-A towards interest under section 201(1A) of the Act on Rs..24,76,17,968/- is confirmed. Thus, the grounds concerning the issue under section 201(1A) of the Act is dismissed and the appeal filed by the assessee for AY 2015-16 in ITA No. 2211/Chny/2024 is partly allowed. 15. Similar issues on identical facts have been raised by the assessee in its appeals for AYs 2016-17, 2017-18, 2020-21, 2021-22, 2018-19 & 2019-20 in ITA Nos. 2201, 2203, 2205, 2209, 2213 & 2215/Chny/2024 respectively and since, we decided the issues in ITA No. 2011/Chny/2024 for AY 2015-16 in the aforementioned paragraphs, our findings would be equally applicable to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. He prayed to allow the grounds of appeal raised by the assessee. 19. The ld. DR relied on the order of the ld. CIT(A). 20. Heard both the parties and perused the material available on record. We note that in the case of non-resident vendors, the assessee made provision of Rs..1,97,15,000/- as on 31.03.2015. Admittedly, the said provision was reversed as on the first day of subsequent financial year i.e., 01.04.2015. On perusal of the details of chart which clearly explains the same and the assessee incurred expenditure with respect of invoices from non-resident vendors to an extent of 1,18,63,600/-. Therefore, the Assessing Officer held the assessee failed to deduct TDS on Rs..78,52,000/- [Rs..1,97,15,000 - 1,18,63,000/-] and imposed Rs..24,91,950/- as TDS along with interest under section 201/201(1A) of the Act against balance provision, which remained unpaid. We find same identical issue was discussed in earlier paragraphs of this order relating to resident-vendors in ITA No. 2011/Chny/2024 for AY 2015-16, where, by following the order of the Bangalore Tribunal, we held that no TDS and interest under section 201/201(1A) of the Act is liable to be levied on balance unpaid pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shifting [MLI] and agreement between the Government of the Republic of India and the Government of the Republic of Singapore for the avoidance of double taxation, is not acceptable. Thus, in the present case, as already discussed above, the provision of Rs..1,97,15,000/- was made as on 31.03.2015 and actual payment was made to an extent of Rs..1,18,63,000/-. Therefore, the liability to deduct TDS shall be on the amount of actual payment only. In this scenario, by following the order of Bangalore Tribunal in the case of Biocon Ltd. v. DCIT (supra), we hold tax liability upon the recipient will be on the amount to extent of Rs..1,18,63,000/- and accordingly, the TDS liability also on the said amount actually paid and interest under section 201(1A) of the Act is liable to be paid on Rs..1,18,63,000/-. Therefore, the sum of Rs..14,23,560/- calculated in para 11 of the order under section 201(1A) of the Act on Rs..1,18,63,000/- is confirmed. Thus, the grounds concerning the issue under section 201(1A) of the Act raised by the assessee for non-resident vendors is dismissed. 22. With regard to ground No. 2 raised by the assessee concerning limitation, the ld. AR did not advance any argum ..... X X X X Extracts X X X X X X X X Extracts X X X X
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