Assessee not in default for tax; Appeals partly allowed for AY 2013-14 & 2014-15.

The Tribunal held that the assessee could not be treated as an 'assessee in default' for non-deduction of tax at source on year-end provisions for expenses in AY 2013-14 and 2014-15. Regarding short-deduction of tax on certain expenditures, the Tribunal remitted the issue for verification of lower tax deduction certificates for AY 2013-14 and directed the deletion of certain demands for AY 2014-15. The incorrect calculation of interest under section 201(1A) for AY 2014-15 was remitted to the Assessing Officer for recalculation. The appeals were allowed partly for statistical purposes.

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Issues Involved:
1. Whether the assessee could be treated as an 'assessee in default' under section 201(1) of the Income-tax Act, 1961 for non-deduction of tax at source on year-end provisions for expenses.
2. Whether the assessee could be treated as an 'assessee in default' under section 201(1) of the Act for short-deduction of tax at source on certain expenditures.
3. Incorrect calculation of interest under section 201(1A) of the Act.

Summary:

Issue 1: Non-deduction of tax at source on year-end provisions for expenses

For AY 2013-14, the Revenue argued that the assessee made year-end provisions for expenses amounting to Rs.86,12,471/- without deducting tax at source, thus treating the assessee as 'assessee in default' under section 201(1) and levying interest under section 201(1A). The assessee contended that the payees were not identifiable at the year-end, and the provisions were reversed in the next financial year when invoices were received, and tax was duly deducted and remitted. The Tribunal, relying on the jurisdictional High Court's decisions in UCO Bank vs. Union of India and DCIT vs. Ericsson Communications Ltd., held that in the absence of an ascertainable amount and identifiable payee, the assessee cannot be treated as 'assessee in default' for mere book entries. Consequently, the interest under section 201(1A) was also deleted.

For AY 2014-15, the Tribunal applied the same rationale as in AY 2013-14, holding that the assessee could not be treated as 'assessee in default' for non-deduction of tax at source on year-end provisions for expenses.

Issue 2: Short-deduction of tax at source on certain expenditures

For AY 2013-14, the Tribunal noted that out of the total TDS demand of Rs.23,03,028/-, Rs.14,41,781/- was due to short-deduction of tax on certain expenditures. The assessee argued that tax was deducted based on lower tax deduction certificates obtained under section 197. The Tribunal remitted the issue to the Assessing Officer (AO) for verification of these certificates.

For AY 2014-15, the Tribunal found that the assessee had deducted tax on an aggregate amount of Rs.1,70,71,786/- under 'Retainership fee,' which included Rs.54,71,186/- transferred to 'Professional charges.' The Tribunal directed the AO to delete the demand related to professional expenses. Additionally, the Tribunal restored the issue of rent expenses, retainership fees, and search engine marketing expenses to the AO for de novo adjudication, allowing the assessee to furnish fresh evidence.

Issue 3: Incorrect calculation of interest under section 201(1A)

For AY 2014-15, the Tribunal noted that the issue of incorrect calculation of interest under section 201(1A) was consequential and restored it to the AO to recalculate in accordance with law after considering the Tribunal's directions on other grounds.

Conclusion:

The appeal for AY 2013-14 was allowed for statistical purposes, and the appeal for AY 2014-15 was partly allowed for statistical purposes.

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