2023 (1) TMI 778

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....onsider following questions of law: 1. Whether, in the facts and in the circumstances of the case, the Tribunal is right in law in sustaining TDS obligation on year end provision made on ad hoc basis and reversed immediately thereafter? 2. Whether, in the facts and in the circumstances of the case, the Tribunal is right in law in not considering applicable DTAA while upholding TDS in relation to services from non-residents? 2. Heard Shri. Chaitanya, learned Senior Advocate for the Assessee and Shri E. I. Sanmathi, learned Senior Standing Advocate for the Revenue. 3. Brief facts of the case are, assessee is a Public Limited Company in the business of providing software services and development of various products for ....

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....nection with services rendered. In certain cases, the invoices for such services are not received by 31st March of the relevant year. In such cases, year-end provisions are made on 'estimate basis'. The same are subsequently reversed in the books of account on the first day of next year in consonance with law laid down in KPTCL Vs. DCIT [2016] 383 ITR 59 (Kar) and Toyota Kirloskar Pvt Ltd. Vs. ITO [2021] 434 ITR 719 (Kar) wherein it is held that no TDS is required for year-end provision which has been subsequently reversed; • in the subsequent year, as and when the party's account is credited, TDS has been made. TDS is a vicarious liability and not required unless there is an income in the hands of the payee as held in Eli Lily....

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....rges accrued in books of accounts; • Section 40(a)(ia) of the Act read with Section 194J Explanation(C), requires that tax has to be deducted at source when amount is paid or credited to the account of payee whichever is earlier. Though the assessee has credited in the books of account it has not deducted TDS; • failure to deduct tax attracts disallowance under Section 40(a)(ia) of the Act; • scheme of TDS provisions applies not only to the amount paid, which bears the character of "income" but also to gross sums, the whole of which may not be income or profit in India in the hands of the recipient. 7. Shri. Sanmathi has placed reliance on Palam Gas Service Vs. CIT [2017] 394 ITR 0300 (SC); CIT, New....