TaxTMI 
TaxTMI 
2026 (9) TMI 435
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....b) "On the facts and in the circumstances of the case and law, the Id. ADDL/JCIT (Appeal) has erred in holding that provisions of TDS is not applicable on the amount disallowed under section 40(a)(ia) of the Act without appreciating the fact that the expenditure has been credited by the assessee company in the account of the payee in the books of accounts of Assessee Company. The liability has been crystallised and the provisions have been made. c) "On the facts and in the circumstances of the case and law, the ld. ADDL/JCIT (Appeal) has erred in holding that provisions of TDS is not applicable on the amount disallowed under section 40(a)(ia) of the Act without appreciating the fact that the assessee itself too implicitly recognized that such credit entries are subject to TDS provisions. The assessee in its computation of income suo moto disallowed such entries u/s 40(a)(ia)." d) "On the facts and in the circumstances of the case and law, the ld. ADDL/JCIT (Appeal) has erred in holding that provisions of TDS is not applicable on the amount disallowed under section 40(a)(ia) of the Act without appreciating the fact that in the case of Inter Globe Aviation Ltd, Vs. ....
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....4J transaction and order u/s. 201 will be passed. 4. In response, the assessee filed its submissions, wherein, it was submitted that merely because it has not deducted tax at source on year end provisions, it cannot be treated as an "assessee in default" in respect of non-deduction of tax at source on provision entries as at the year-end, as the invoices from the concerned vendors were not received and accounted for in the books of accounts. It was further submitted that in view of the same, such provision amount has also been consistently disallowed under section 40(a)(ia) of the Act. It was submitted that such expenses cease to exist so far as income-tax law is concerned and they are as good as never been incurred by assessee company for the initial year in which the same are disallowed. Moreover, on such provision amount, the assessee company has paid much higher amount of tax i.e., at the normal corporate tax rate in lieu of 2%/10% towards TDS. It was submitted that in this manner, it has also been ensured the Revenue is not put to any loss. It was further submitted that the compliance with TDS provisions is done when the invoice is received from the vendors in subsequent ye....
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....1A), relying upon the decision of the Coordinate Mumbai Benches in case of Pfizer Limited vs. ITO (TDS) (ITA No.1667/MUM/2010). It was submitted that the decision of ld. CIT(A) is not acceptable to the Revenue. In this regard, it was submitted that the expenditure has been credited in the books of accounts of the assessee company. The provisions have been made by the assessee company after taking into account the quantum of the work done by the payees for the company and consequent liability arising on the company to pay for such work. It was submitted that for the TDS liability to come into picture, actual payment is not mandated. The TDS liability gets attracted at the time of payment or credit in the books of accounts of the assessee company, whichever is earlier. In the instant case, although no payment has been made, credit entries have been made in the books of accounts of the assessee company. Accordingly, the assessee is liable for TDS deduction on these provisions/credit entries. It was further submitted that the assessee itself implicitly recognized that such credit entries are subject to TDS provisions, as the assessee company in its computation of income suo-moto disall....
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....the said provision was disallowed by assessee while filing its return of income to the extent of 30% amounting to Rs. 27,26,85,856/- as per the provision of Section 40(a)(ia) of the Act and the resultant income-tax thereon has been paid at the applicable corporate tax rate. It was further submitted that the entire provision of Rs. 90,89,52,854/-created at the year-end was either accounted for against the vendors in the books in the subsequent year(s) on receipt of invoices or was reversed. In this regard, it was submitted that the TDS compliances, where applicable were duly made in the subsequent financial year in respect of invoices received from the vendors on which the TDS was applicable to the turn of Rs. 76,31,57,103/-. Further, provision amounting to Rs. 13,83,21,655/- was reversed as the same was in the nature of ad-hoc provision and no invoices were received from the vendor entities and the remaining amount of Rs. 74,74,095/- was not subject to TDS as it related to material purchase, reimbursements, below threshold, etc. It was accordingly submitted that as and when the liability to pay the parties arise, i.e, as and when the invoices were received, the taxes were deducted ....
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....the ld. DR and in any case, there is no stay on the order of the Coordinate Mumbai Benches. It was accordingly submitted that the order so passed by the ld. CIT(A) be confirmed and the appeal of the Revenue be dismissed. 15. We have heard the rival contentions and pursued the material available on record. The Assessing Officer has held that the assessee to be "assessee in default" in terms of Section 201(1) of the Act on account of non-deduction of TDS as required in accordance with the provisions of this Act. In this regard, we refer to the provisions of Section 201(1) which provides that where any person, including the principal officer of a company, who is required to deduct any sum in accordance with the provisions of this Act, does not deduct, or does not pay, or after so deducting fails to pay, the whole or any part of the tax as required by or under this Act, then such person shall, without prejudice to any other consequences which he may incur, be deemed to be an "assessee in default" in respect of such tax. 16. It has been further provided that where any person, including the principal officer of a company, who fails to deduct the whole or any part of the tax in acco....
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....art of the tax in accordance with the provisions of Chapter XVII-B on any such sum, but is not deemed to be an "assessee in default" under the first proviso to sub-section (1) of Section 201, then for the purposes of this sub-clause, it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the payee. 19. We, therefore, find that the provisions of Section 40(a)(ia) are to ensure that the assessee complies with the provisions of Chapter XVII-B of the Act and are more in the form of deterrence, and at the same time, the assessee continues to be liable in terms of compliances with the provisions of Chapter XVII-B of the Act. Therefore, one has to see whether the provisions of Chapter XVII-B are applicable in a particular case or not. Secondly, whether due compliances have been made by the assessee in terms of Chapter XVII-B of the Act, and where the compliances have not been made, then the consequences in terms of been treated as assessee in default in terms of section 201(1) and Section 40(a)(ia) shall devolve on the assessee. 20. Therefore, the fact that the assessee has done suo moto disallowances in its re....
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.... the assessee has failed to deduct TDS on year end provisions, the assessee is held to be assessee in default. The disclosure in the tax audit report is no doubt a good starting point, however, in absence of requisite disclosure in the tax audit report in terms of individual vendors and amounts and corresponding TDS liability, as we have noted earlier, where only gross numbers have been stated, before the assessee is charged with consequences in terms of section 201(1)/201(IA) of the Act, it is essential to understand as to how the provisions are made in the books of accounts, what accounting entries are passed while creating the provisions, whether entries are passed in the account of individual vendors whereby specific sums are provided/credited or entries are passed in terms of general expenses heads and provisions for expenses to meet and comply with the accounting requirements and standards of preparing and maintaining the financial statements. Identification of individual vendor accounts and credits in the individual accounts and basis thereof in terms of estimation or actual invoices are essential to determine the nature and quantum of TDS liability in the hands of the asses....