TaxTMI 
TaxTMI 
2014 (1) TMI 1543
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....,860 3 Agreen Hashco 559057 1,16,900 4 Agreenco soiety 366446 38,310 Total 11,93,820 Hence, the AO treated the assessee as an 'assessee in default' and raised demand u/s 201 of the Act equal to the amount of tax deductible at source, referred above. The AO has also levied interest u/s 201(1A) of the Act to the tune of Rs. 7,16,290/-. Aggrieved, the assessee carried the matter in appeal before the ld CIT(A), but could not succeed. Hence, the assessee has filed the present appeal before us. 3. The ld counsel for the assessee submitted that all the persons to whom interest was payable are liable to pay tax under the Income Tax Act. He further submitted that the assessee herein cannot be treated as an assessee in default, if the payees have directly paid tax on the above said interest income. In this regard, the ld AR relied on the following decisions: 1) Hindustan Coca Cola Beverage P. Ltd. v. CIT -293 ITR 226 (SC) 2) CIT vs Adidas (I) Marketing P Ltd (288 ITR 376 (Del) 3) Vodafone Essar Ltd vs DCIT (135 TTJ 385 (ITAT Mum) 3.1 The ld AR further submitted that the AO is not entitl....
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....ed in paragraph 2 supra, in its books of account. Admittedly, the assessee did not deduct tax at source from the interest amounts so credited. According to Ld A.R, the assessee did not claim the interest amounts, referred supra, as expenditure. Accordingly, it was submitted that the AO was not correct in initiating proceedings u/s 201/201(1A) of the Act and for that proposition, the Ld A.R placed reliance on the decision rendered by the Mumbai bench of Tribunal in the case of Pfizer Ltd (supra). 5.1 We have carefully considered the decision rendered in the case of Pfizer Ltd (supra). We notice that the assessee therein was having branches at multifarious locations and innumerable transactions and hence it was following the practice of making provision for expenses at the end of the year. The obvious reason was that it could not receive all the bills by the time accounts are finalized. The adhoc provision so made was reversed in the succeeding year, in which the actual expenses were booked under specific heads and the TDS compliance was also made at that point of time. The contention of the assessee was that it did not know the details of payee at the time of making provision for....
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....t/payee and not from the angle of the person making the payment. Accordingly, the accounting/tax treatment given by the payer in respect of interest paid by him may not be relevant at all for the purposes of sec. 194A of the Act. So long as the interest amount constitutes "income" in the hands of recipient, the payer shall be liable to deduct tax at source on the interest amount so paid. Accordingly, even if the payer has disallowed the expenditure u/s 40(a)(ia) of the Act or did not claim the same as expenditure at all, he shall still be liable to deduct tax at source u/s 194A of the Act on the interest amount so paid, if the said payment is liable for tax deduction at source. We notice that the Mumbai bench of Tribunal, in the case of Pfizer Ltd (supra) did not consider the express provisions contained in sec. 194A of the Act. Further we notice that the provisions of sec. 40(a)(ia) does not override the provisions of sec. 201 of the Act. We notice that provisions of sec. 40(a)(ia) do not provide for absolute disallowance as in the case of say, sec. 40A(3) of the Act. The amount disallowed u/s 40(a)(ia) in one year can be claimed as deduction in the year in which the TDS provision....
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....ome so received without deduction of tax at source, then the payer cannot be treated as the assessee in default for the whole or that part of the amount as the case may be. It is therefore clear that though the duty of deduction of tax at source was there at the time of making the payment or crediting the account of payee, but its failure will not lead to adverse consequences by treating the person paying the income as the assessee in default if eventually either the payee is not liable to tax on such sum or he has already paid the tax due on the amount of income so received.... @ para 72 in page 317, it was observed as under:- "... Further these sections do not override section, 195, which in turn, fixes the liability on the person responsible for deducting tax at source only if the sum paid or credited to the account of the non-resident is chargeable to tax. The question of deducting tax at source will arise only if the sum payable to the non-resident is chargeable to tax in India. Therefore to argue that the liability to deduct tax at source is de hors the eventual liability of the non-resident and the person responsible for paying or crediting an....