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2015 (10) TMI 66 - AT - Income TaxTDS deduction for interest, professional fees and provision on Transport contractors - reversal of provision made - later TDS deducted on actual basis - CIT(A) held that the TDS was not deductable in the same year in which Assessee actually incurred the expenditure and relevant entries made in the books - Held that - There is no dispute with reference to the fact that assessee has only made the provisions without identifying the parties as a liability in the year and actual amounts were credited in a later year on which TDS was made. It is also a fact that in the computation of income, assessee has added back the entire provision and has not claimed any deduction. We fully agree with the findings of the Ld. CIT(A) on the issue that there is no scope for deducting tax, as the amounts are not covered by the provisions of section 194C to 194J. Not only that A.O. has only raised the interest under section 201(1A) and has not raised the basic demand under section 201(1). This aspect was also considered by the Ld. CIT(A) that assessee was not held as assessee in default and therefore, on this reason also interest cannot be levied as the amount to be deducted has not even quantified under section 201. AO was also not correct in levying interest up to the date of order while accepting that the amounts provided were reversed in later year and TDS was made on actual claims made in that year. See PFIZER LTD. Versus INCOME TAX OFFICER (TDS), (OSD) RANGE-2, MUMBAI 2012 (11) TMI 164 - ITAT MUMBAI - Decided in favour of assessee.
Issues:
1. Deletion of interest of short/non-deduction under section 201(1A) Analysis: The appeal before the Appellate Tribunal ITAT Hyderabad concerned the deletion of interest of short/non-deduction under section 201(1A) by the Ld. CIT(A)-II, Hyderabad. The Revenue raised the issue of whether the TDS was correctly not deducted in the same year in which the Assessee incurred the expenditure and made relevant entries in the books. The Assessee, engaged in manufacturing and trading compressors, had debited certain amounts towards provisions without deducting TDS. The Assessing Officer disallowed the claim under section 40(a)(ia) and raised a demand under section 201(1A) for the period from 01.04.2006 to 31.03.2011. Upon appeal, the Assessee contended that provisions were created in the books without specific identification and quantification against any payee, hence TDS was not deducted. The Assessee reversed the provision and made TDS payments in the subsequent year, claiming it for A.Y. 2008-09. The Ld. CIT(A) observed that the obligation to deduct TDS arises only when a sum is chargeable under the IT Act and when the payee is identifiable. Relying on judicial decisions, the Ld. CIT(A) held that TDS was not attracted on the said amounts as the payee was not identifiable at the time of making the provision. The Revenue argued that the Ld. CIT(A) erred in deleting the amount and referred to a Cochin Tribunal decision supporting the levy of interest under section 201 and 201(1A) even if the amount was disallowed under section 40(a)(ia). However, the Assessee reiterated its position, relying on the Pfizer Ltd. case decision. The Tribunal examined the contentions and found that the Assessee had only made provisions without identifying the parties, and TDS was made when actual amounts were credited in a later year. The Tribunal agreed with the Ld. CIT(A) that there was no scope for deducting tax as the amounts were not covered by specific provisions. It was noted that the AO had only raised interest under section 201(1A) and not the basic demand under section 201(1). The Tribunal distinguished another case cited by the Revenue, emphasizing that the factual conditions in the present case aligned with the Pfizer Ltd. case. Therefore, the Tribunal affirmed the Ld. CIT(A)'s decision and dismissed the Revenue's appeal, upholding the deletion of the interest under section 201(1A). In conclusion, the Tribunal dismissed the appeal of the Revenue, affirming the Ld. CIT(A)'s decision regarding the deletion of interest of short/non-deduction under section 201(1A). The judgment highlighted the importance of identifying the payee and quantifying the amounts for TDS obligations, ultimately supporting the Assessee's position in this case.
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