2015 (6) TMI 24 - AT - Income Tax

Non-deduction of tax under section 194C - assessee-in-default under section 201(1) - Held that - As the appellant was required to deduct tax on the year end provisions made by it. However, as tax has been deducted subsequently before due date of filing of return and the remaining amount being disallowed and added back to the total income while filing return of income, the appellant is not held to be in default u/s.201. - The AR of the assessee could not explain what is the grievance of the assessee arising out of the above order of the CIT(A), who has decided the issue in favour of the assesse - Decided against assesse. Non deduction of tax at source u/s.194C - assessee-indefault under section 201 - Held that - Simply because the amount was disallowed in the assessment made by invoking the provisions of section 40(a)(ia), does not lead to the conclusion that the assessee cannot be treated as assessee-indefault under section 201 in respect of the same amount. Rather, when the assessee is found to be an assessee-in-default in respect of the TDS amount, then out of many consequences, one of the consequences, is disallowance under section 40(a)(ia) of the Act. We, therefore, do not agree with the order of the CIT(A) in respect of not treating the assessee as assessee-in-default in respect of ₹ 4,98,43,087/-, on the ground that the said amount was disallowed under section 40(a)(ia) of the Act. We, therefore, set aside the order of the CIT(A) to the above extent. However, we find that the assessee has also taken other grounds of appeal before the CIT(A) for its contentions that it should not be treated as assessee-in-default in respect of ₹ 4,98,43,087/-. The same was not adjudicated upon by the CIT(A) as he decided the issue in favour of the assessee on the above ground. In the circumstances, in our considered view, it shall be in the interest of justice to restore the issue back to the file of CIT(A) in respect of the amount of ₹ 4,98,43,087/- for deciding the other grounds of appeal after allowing reasonable opportunity of hearing to both the parties - Decided in favour of revenue for statistical purposes. Tds on payment of pest control charges - 194C or 194J - Held that - error in the order of the CIT(A) could be pointed out by the DR. He could not cite any contrary decision in support of the claim of the Revenue that the tax was required to be deducted at source under section 194J and not under section 194C of the Act. Further, no material was brought on record by the Revenue to show that any technical services were availed by the assessee for doing pest control in its premises. Hence, we find no good reason to interfere with the order of the CIT(A), which is hereby confirmed - Decided against revenue.

Summary

Issues:
1. Treatment of assessee as assessee-in-default under section 201(1) for non-deduction of tax under section 194C of the Act.
2. Disallowance and levy of interest under section 201(1A) of the Act.
3. Dispute regarding the deduction of tax on certain expenses under section 194C or 194J of the Act.

Issue 1: Treatment of assessee as assessee-in-default under section 201(1) for non-deduction of tax under section 194C of the Act:
The AO treated the assessee as assessee-in-default under section 201(1) for not deducting TDS on year-end provisions totaling &8377; 14,48,42,326. However, the CIT(A) held that the assessee was not in default as the tax audit report showed that &8377; 9,49,99,239 was treated as TDS discharged before the due date of filing the return, and the remaining amount of &8377; 4,98,43,087 was disallowed under section 40(a)(ia) of the Act. The CIT(A) concluded that the assessee was not in default under section 201. The Tribunal dismissed the appeal of the assessee as the grounds were not pressed.

Issue 2: Disallowance and levy of interest under section 201(1A) of the Act:
The AO held the assessee liable for TDS under section 201(1A) and interest amounting to &8377; 36,35,408. However, the CIT(A) ruled in favor of the assessee, stating that the tax audit report confirmed that the tax was deducted and deposited before the due date of filing the return, and the disallowed amount was added back to the income under section 40(a)(ia). The Tribunal dismissed the appeal as the grounds were not pressed.

Issue 3: Dispute regarding the deduction of tax on certain expenses under section 194C or 194J of the Act:
The Revenue contended that the assessee should have deducted tax under section 194J on certain expenses, while the assessee argued that tax was correctly deducted under section 194C. The AO calculated a shortfall in tax and the CIT(A) allowed the appeal based on a decision of the Hon'ble Gujarat High Court. The Tribunal upheld the CIT(A)'s decision, noting the absence of contrary evidence or technical services availed by the assessee for pest control. The Revenue's appeal was dismissed.

In conclusion, the Tribunal partially allowed the Revenue's appeal and dismissed the assessee's appeal, maintaining the decisions made by the CIT(A) regarding the treatment of the assessee as default, disallowance and levy of interest, and the dispute over the deduction of tax on certain expenses.