9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2020 (9) TMI 1100 - AT - Income TaxAddition u/s 40(a)(ia) - Non-deduction of TDS u/s 194H - discount versus commission - Held that - the assessee was not required to deduct TDS on the amounts of discount on sale of Set-top box and hardware, discount on sale of recharge coupon and vouchers, bonus or credit provided by assessee to subscribers, sales promotion expenses and distribution channel support expenses. - transaction between the company and distributor is on principal to principal basis and all the risk, loss, damages are transferred to distributor on delivery. Distributors are free to sale at any price below maximum retail price. In this regard, the assesse has filed the sample copy of invoices for sale of Set Top Box (STB) and other recharge coupons to prove that it is a sale but not services to come within the ambit of the definition of commission as defined under section 194H - Assessee is not required to deduct TDS on discount allowed on sale of Set Top Box and hardware, recharge coupons vouchers and disallowance of bonus or credit provided to subscribers including sales promotion expenses. Disallowance of year end provisions was made by assessee in respect of expenses - whether TDS is deducted in the subsequent years pursuant to bills received and payments made - HELD THAT - No merit in the argument of the assessee that TDS provisions are not applicable when year-end provisions are made without crediting to respective parties account. To this extent, we are fully subscribed to the findings recorded by the learned AO as well as learned CIT(A). As regards to the claim of the assessee that in subsequent Financial Year year-end provisions have been either reversed or paid subject to deduction of TDS, does not alter the legal position in so far as disallowance of expenses under section 40(a)(ia) for non-deduction of Tax at source. The law is very clear as per which TDS is required to be deducted when credit or payment whichever is earlier. There is no error in findings recorded by the lower authorities in disallowing year-end provisions for non-deduction of TDS under respective provisions of the Act. Accordingly, we reject the ground taken by the assessee. Disallowance of interest expense u/s 36(1)(iii) - AO observed that the assessee had not allocated any interest expenditure against the capital WIP AO held that part of interest was allocable to such capital WIP and accordingly, he has disallowed proportionate interest expenditure - HELD THAT - It is settled position of law that if own funds are used for acquisition of capital assets, then the question of disallowance of interest does not arise. Further, if there are funds available, both interest free and interest bearing, then a presumption can be made that the investments were made out of interest free funds available with the company, if the interest free funds are sufficient to meet the investment as held in the case of Reliance Utilities and Power 2009 (1) TMI 4 - BOMBAY HIGH COURT - In this case, on perusal of facts we find that the assessee has filed necessary evidences to prove availability of own funds which is sufficient to cover investment in capital work in progress. AO was erred in disallowing proportionate interest expenses u/s 36(1)(iii) of the Act. Hence, we direct the AO to delete disallowances of interest for both assessment years. Disallowance u/s 14A - HELD THAT - Once, there is no exempt income earned for the year, then disallowance contemplated u/s 14A of the Act cannot be pressed into. In this case, the Revenue has not disputed the fact that the assessee has not earned exempt income for the year under consideration. Since, there is no exempt income for the year, the disallowance of expenditure contemplated u/s 14A of the Act cannot be made. CIT(A) after considering relevant facts has rightly deleted the addition made by the AO towards disallowance of expenses u/s 14A.
Issues Involved:
1. Disallowance of discount and other expenses under Section 40(a)(ia) of the Income Tax Act for non-deduction of TDS. 2. Disallowance of year-end provisions of expenses under Section 40(a)(ia) of the Act. 3. Disallowance of interest expenses under Section 36(1)(iii) of the Act. 4. Disallowance under Section 14A of the Act for expenses related to exempt income. Detailed Analysis: 1. Disallowance of Discount and Other Expenses Under Section 40(a)(ia): The primary issue was the disallowance of various expenses such as discounts on the sale of set-top boxes and hardware, recharge coupon vouchers, bonus or credit to subscribers, sales promotion expenses, and distribution channel support expenses due to non-deduction of TDS under Section 40(a)(ia). The Tribunal observed that the discounts provided were not in the nature of commission and thus not subject to TDS under Section 194H. This conclusion was supported by previous Tribunal decisions in the assessee's own case and judgments from the Bombay High Court, including Piramal Healthcare Ltd., Qatar Airways Ltd., and Intervet India (P.) Ltd. Consequently, the Tribunal directed the Assessing Officer to delete the disallowance of these expenses. 2. Disallowance of Year-End Provisions of Expenses: The assessee made year-end provisions for expenses without deducting TDS, resulting in disallowance under Section 40(a)(ia). The Tribunal upheld the disallowance, emphasizing that TDS must be deducted at the time of credit or payment, even if credited to a suspense account. The Tribunal rejected the assessee's argument that TDS provisions do not apply to year-end provisions without crediting to respective parties' accounts. The Tribunal also noted that the subsequent deduction of TDS on these provisions in the following year does not alter the legal position for the disallowance in the current year. 3. Disallowance of Interest Expenses Under Section 36(1)(iii): The issue involved the disallowance of interest expenses related to capital work-in-progress (WIP). The Tribunal found that the assessee had raised sufficient share capital to cover the investment in capital WIP and had not borrowed specific loans for acquiring capital assets. Relying on the Bombay High Court decision in Reliance Utilities & Power Limited, the Tribunal held that if own funds are used for acquiring capital assets, the disallowance of interest does not arise. The Tribunal directed the Assessing Officer to delete the disallowance of interest expenses. 4. Disallowance Under Section 14A for Expenses Related to Exempt Income: The Revenue's appeal challenged the CIT(A)'s deletion of disallowance under Section 14A for expenses related to exempt income. The Tribunal noted that the assessee had not earned any exempt income during the year. Citing the Bombay High Court's decision in Ballarpur Industries Ltd. and the Delhi High Court's decision in Cheminvest Ltd., the Tribunal held that no disallowance under Section 14A could be made if there is no exempt income. Consequently, the Tribunal upheld the CIT(A)'s decision and dismissed the Revenue's appeal. Conclusion: The Tribunal allowed the assessee's appeals partly, directing the deletion of disallowances related to discounts and other expenses and interest expenses. It upheld the disallowance of year-end provisions and dismissed the Revenue's appeals regarding disallowance under Section 14A.
|
