2022 (3) TMI 1506 - AT - Income Tax

Disallowance u/s 40(a)(ia) - proceedings initiated u/s 201(1) / 201(1A) - AO disallowed the deduction claimed stating that the assessee did not furnish a one-to-one correlation of the provisions created with the invoices subsequently raised and TDS is remitted - HELD THAT - The amount which was disallowed earlier by the assessee is claimed as a deduction u/s.40(a)(ia) in the year under consideration based on the fact that the assessee has deducted and remitted the TDS on the amount in year under consideration. There is no other condition attached while claiming the expenditure in the year of TDS remittance under the law. Hence the reasons given by the AO for disallowance that one-to-one matching with the provision made for the previous not done and that the invoices pertain to previous year are not tenable. The fact as submitted by the AR that the said details are duly verified and taken into account for computation of interest u/s.201(1A) in the previous assessment 2010-11 also merits consideration. Considering the provisions of the Act and the facts we are of the considered view that the assessee has rightly claimed the deduction u/s 40(a)(ia). Relief on account of deferred revenue expenditure - adjustment of TDS credit and negative movement in the deferred revenue - HELD THAT - We notice that the same issue is pending before the coordinate bench of the Tribunal for adjudication against the order of the CIT(A) for various assessment years from 2009-10 in assessee s own case. The issue can be decided for the year under consideration only based on the outcome of the other appeals pending for the earlier years as the decision will have a cascading effect on the issue for the year under consideration. At this point in time we can only issue a direction to the AO to follow the decision that would be adjudicated by the coordinate bench of the Tribunal for assessment year 2009-10 2010-11 on this issue. The AO is directed to grant consequential relief in accordance with the decision of the coordinate bench of the Tribunal in terms of adjustment of TDS credit and negative movement in the deferred revenue. The AO is directed accordingly and that a reasonable opportunity of being heard to be given to the assessee before the final decision.

Summary

Issues Involved:
1. Disallowance of claim under section 40(a)(ia) of the Income Tax Act, 1961.
2. Consequent relief on account of deferred revenue.

Detailed Analysis:

Disallowance of Claim under Section 40(a)(ia) of the Income Tax Act, 1961 (Ground No. 2):

Background:
The assessee claimed a sum of Rs. 55,27,89,460 under section 40(a)(ia) of the Act, which was disallowed in the previous year for non-deduction of tax at source. The AO disallowed the deduction, stating that the assessee did not furnish a one-to-one correlation of the provisions created with the invoices subsequently raised and TDS remitted.

DRP's Direction:
The DRP directed the AO to examine the details furnished by the assessee and allow the claim if it was in accordance with the provisions of section 40(a)(ia).

Final AO Order:
The AO sustained the disallowance, stating that no new details were made available for verification.

Tribunal's Analysis:
The Tribunal noted that the assessee had deducted and remitted the TDS on the amount in the year under consideration. The Tribunal emphasized that there is no condition under the law requiring one-to-one matching with the provision made for the previous year. The Tribunal directed the AO to give relief to the assessee, allowing the deduction of Rs. 55,27,89,460 under section 40(a)(ia).

Consequent Relief on Account of Deferred Revenue (Ground No. 3):

Background:
The assessee has various long-term contracts, and the revenue and costs are recognized in the profit and loss account as per applicable accounting standards. During the assessment year 2009-10, the AO did not accept the accounting treatment followed by the assessee, leading to an addition which was upheld by the CIT(A).

DRP's Direction:
The DRP did not issue any directions on the ground that no addition was made by the AO in the draft assessment order.

Final AO Order:
The AO confirmed his earlier decision, mentioning that since the end movement of the deferred revenue was negative for the year under consideration, no addition was made.

Tribunal's Analysis:
The Tribunal noted that the issue of treatment of deferred revenue for various assessment years is pending before the coordinate bench of the Tribunal. The Tribunal directed the AO to follow the decision that would be adjudicated by the coordinate bench of the Tribunal for assessment years 2009-10 and 2010-11. The AO was instructed to grant consequential relief in accordance with the Tribunal's decision, ensuring a reasonable opportunity of being heard is given to the assessee.

Conclusion:
The appeal of the assessee was allowed, with the Tribunal directing the AO to grant relief on the disallowance of Rs. 55,27,89,460 under section 40(a)(ia) and to follow the Tribunal's decision on the issue of deferred revenue for earlier years, ensuring appropriate adjustments and reliefs are granted.

Order Pronounced:
The order was pronounced in court on 30th March, 2022.