2018 (1) TMI 1659 - AT - Income Tax

Addition u/s u/s 40(a)(i)and 40(a)(ia) - suo moto disallowance made by assessee - provision made towards payments - Assessee contending that the provisions made were in the nature of contingent liability as the identity of the recipients was not known and in the absence of income in the hands of the recipient, the question of tax deduction at source does not arise - whether the assessee can be held to be in default for non-compliance with the TDS provisions in the facts of present case? - HELD THAT - As provisions are made at the end of the year in respect of which services were received and no TDS deduction was made. It is not the case of the assessee that the services were not rendered by the vendors. Therefore, it can be said that the liability had already crystallized and there exists an obligation to pay this amount and no uncertainty is involved in the transaction. Once services are received by the assessee, the payee or recipients of the payments are clearly identified and therefore the contention that the payees are not identifiable cannot be accepted. Furthermore, the provisions of section 194A and 194 C which are applicable to the payments in question contains Explanation clarifying that any amount credited to any account called payable account or suspense account or by any other name in the books, the same shall constitute credit of income to the account of the payee and the provisions of TDS are applicable. As in the present case, payees were identified and from the details of provisions made available before us, in the paper book, it is clear that it is not an ad hoc provision as the provisions contained odd figure also and it is also clear that the payees were clearly identified as the services were already received. Therefore, the ratio of the decision of this Tribunal in the case of M/s.TE Connectivity India Pvt. Ltd. 2016 (5) TMI 1222 - ITAT BANGALORE is not applicable - in the result the appeal filed by the assessee is dismissed.

Summary

Issues:
Appeals against orders of Commissioner of Income Tax for assessment years 2012-13 and 2013-14.

Analysis:
1. The appeals were filed by the assessee-company against the orders of the Commissioner of Income Tax for the assessment years 2012-13 and 2013-14. The main issue was whether the assessee could be held in default for not complying with TDS provisions.

2. The assessee contended that the provisions made were in the nature of contingent liability as the recipients were not known, and therefore, tax deduction at source was not required. The Commissioner did not accept this argument and held the assessee as in default. The Commissioner directed the TDS officer to reduce the tax amount on payments where TDS was subsequently deducted.

3. The assessee raised multiple grounds of appeal, arguing that the provisions made were ad hoc and not divisible party-wise, and that the liability had not crystallized. The appellant claimed that adequate provisions were made and TDS was remitted as required by law, thus no default had occurred.

4. The Tribunal analyzed the facts and held that since services were received, the liability had crystallized, and there was no uncertainty in the transaction. The payees were identified, and the provisions of section 194A and 194C applied. The Tribunal distinguished a previous case where payees were not identifiable, stating that in the present case, payees were identified, and the provisions made were not ad hoc.

5. Consequently, the Tribunal dismissed the appeal for the assessment year 2012-13. The Tribunal also dismissed the appeal for the assessment year 2013-14, citing identical facts and reasons as the previous appeal.

In conclusion, the Tribunal upheld the orders of the Commissioner of Income Tax, holding the assessee in default for non-compliance with TDS provisions due to the crystallized liability and identified payees.