TaxTMI 
TaxTMI 
2026 (8) TMI 1819
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....S on provisions created for expenses without appreciating the provisions of sub-section (2) of section 194C, Explanation (iv) to section 194H and Explanation (ii) to section 194I is contrary to law and to the facts and circumstances of the case. 2. Whether on the facts and circumstances of the case and in law, in the context of 'Provision for expenses', the Addl./JCIT(A) has erred in deleting the short/non-deduction of tax by holding that in view of disallowance under section 40(a)(i)/40(a)(ia), no demand can be raised under section 201(1)/201(1A) of the Act." 3. Briefly stated, the assessee is a domestic company engaged in the manufacture, marketing and trading of pharmaceutical products. During the financial year relevant to the assessment year under consideration, the assessee created year-end provisions aggregating to Rs. 50,49,86,000/- in respect of various expenses, including commission or brokerage, rent, payments to contractors and fees for technical services. No tax was deducted at source at the time of creation of the aforesaid provisions. The non-deduction of tax at source was duly reported by the tax auditor in paragraph 21(b) and clause 34(a) of Form No. 3C....
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....r section 201(1A). The Revenue has challenged the aforesaid decision before us. 6. We have heard the learned Departmental Representative ("ld.DR") and the learned counsel for the assessee and carefully considered their respective submissions. We have also perused the material available on record, the orders of the Assessing Officer and the learned JCIT(A), and the judicial precedents relied upon by the assessee. At the outset, we find that the controversy before us is not a new issue in the case of the assessee. The very same issue concerning the liability to deduct tax at source on year-end provisions has been considered by the Tribunal repeatedly in the assessee's own case for several assessment years. The factual position placed before us is also materially similar to that considered in the earlier years. The Revenue has not brought on record any distinguishing feature in the facts of the present year or any binding judicial precedent warranting a departure from the consistent view taken by the co-ordinate Benches. 7. In Pfizer Limited v. ITO (TDS) in ITA Nos. 1667/Mum/2010 and 1765/Mum/2010 for assessment year 2007-08, the Tribunal considered the issue of deduction of tax....
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....o a particular person assumes significance in the present context. In the case before us, the provisions were admittedly created on an estimated basis; the actual invoices had not been received; the precise amounts payable were not ascertainable; and the corresponding payees were not identified at the relevant point of time. The provisions were thereafter reversed at the commencement of the succeeding financial year and, upon receipt of the actual invoices and crystallisation of the liabilities, the amounts were recorded in the names of the respective parties and tax was deducted at source wherever applicable. Thus, the year-end entries represented accounting provisions made for recognising estimated expenditure pertaining to the relevant financial year and did not constitute a final credit of an ascertainable amount in favour of an identified payee. 10. We find that the aforesaid factual position is squarely covered by the consistent decisions of the Tribunal in the assessee's own case referred to above. The Revenue has not placed before us any decision of a higher judicial forum taking a contrary view on identical facts, nor has it demonstrated any material distinction between....
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....reasoning was subsequently followed in the decisions for assessment years 2004-05 to 2006-07, 2008-09 and 2009-10 and was reiterated in the latest decision for assessment year 2013-14. In the present case, the assessee had itself disallowed 30% of the expenditure aggregating to Rs.50,49,86,000/- under section 40(a)(ia) while computing its taxable income. The Revenue has not brought on record any distinguishing circumstance warranting a departure from the consistent view taken by the Tribunal in the assessee's own case. We, therefore, respectfully follow the aforesaid decisions and hold that the demand raised under section 201(1) cannot be sustained even on this additional ground. 13. Once the demand under section 201(1) is held to be unsustainable, the consequential levy of interest under section 201(1A) also cannot survive. The interest contemplated under section 201(1A) is consequential to the default contemplated under section 201 and, where the assessee is not liable to be treated as an assessee in default in respect of the relevant transaction or provision, the consequential liability for interest cannot independently survive. In the present case, therefore, the interest of....