AI Drafter 
TaxTMI 
TaxTMI 
2015 (10) TMI 66
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....correct in holding that the TDS was not deductable in the same year in which Assessee actually incurred the expenditure and relevant entries made in the books." 2. Briefly stated, assessee is in the business of manufacturing and trading in compressors for air-conditioners and refrigerators. During the scrutiny of the assessment records, the A.O. noticed that Assessee company has debited a sum of Rs. 1,01,00,000 towards provision for interest, Rs. 48,80,333 towards provision for professional fees and Rs. 28,33,533 towards provision on transport contractors to its P & L Account, without deducting the TDS on the above amounts. The A.O. disallowed the claim of Assessee under section 40(a)(ia) of the I.T. Act and considered a sum of Rs. 22,66....
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....e said amounts on its own. Subsequently, in the next F.Y. 2007-08 relevant to the A.Y. 2008-09 assessee made payments by reversing the entries and crediting the party's account and while making the payment the TDS was deducted and was claimed as expenditure for A.Y. 2008-09. After examining the submissions of assessee and the remand report, the Ld. CIT(A) while relying on the decisions of Industrial Development Bank of India vs. ITO 104 TTJ 230 (Mum.) and Pfizer Ltd. vs. ITO ITA.No.1667/Mum/2010 dated 31st October, 2012 observed as follows : "6. It is surprising to note that the A.O. did not hold the appellant as 'assessee in default' and no reasons were given as to why tax u/s.201(1) was not levied and has simply proceeded with levying ....
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....s connection, reliance is placed on the following judicial decisions : (a) In the case of Industrial Development Bank of India vs. ITO (2006) 104 TTJ 230 (Mum.) it is held as under: "It would be thus seen that the whole scheme of TDS proceeds on the assumption that the person whose liability is to pay an income knows the identity of the beneficiary or the recipient of the income. It is a sine quo non for a vicarious tax deduction liability that there has to be a principal tax liability in respect of the relevant income first, and a principal tax liability can come into existence when it can be ascertained as to who will receive or earn that income because the tax is on the income and in the hands of the person who earns that income. I....
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....ction 194C to 194J so as to raise TDS demand again under section 201 and levy of interest under section 201(1A). 6.2. In view of the above, the demand raised u/s.201(1A) of Rs. 16,96,440/- is ordered to be deleted." 4. Learned D.R. submitted that the Ld. CIT(A) was not correct in deleting the amount and relied on the orders of A.O. He further submitted that the Coordinate Bench of the Cochin Tribunal in the case of Agreenco Fibre Foam (P) Ltd., vs. ITO (TDS), Kannur ITA.No.165/Coch/2012 dated 16.08.2013 upheld the contention of Revenue that interest under section 201 and 201(1A) can be levied, even if the amount was disallowed under section 40(a)(ia). He placed copy of the order of the Coordinate Bench on record and supported Revenue ....
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....e reversed in later year and TDS was made on actual claims made in that year. 7. Learned D.R. however, relied on the Coordinate Bench decision in the case of Agreenco Fibre Foam (P) Ltd., vs. ITO (TDS), Kannur (supra). The facts in the said case are that assessee is a Private Limited Company and credited interest to the sister concerns during the year under consideration without deducting tax at source. Not only that A.O. treated Assessee as 'assessee in default' and raised demand under section 201 of the Act equal to the amount of tax deductible at source. Thereafter, A.O. levied interest under section 201(1A) to the tune of Rs. 7,16,290. It was the finding of the ITAT that even though the amounts were disallowable under section 40(a)(i....