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2023 (5) TMI 1212 - AT - Income TaxAssessee in default u/s 201(1) - non-deduction of TDS on provision for expenses made at the end of the year u/s 194C, 194I and 194J - AO observed that the provision had been made on ad hoc basis in respect of various expenditures by the assessee - HELD THAT - It is a fact on record that such provisions were made in view of accrual method of accounting followed by the assessee and the same were reversed in the books of account on the first day of the immediately succeeding year. Not in dispute that as and when the invoices are received by the assessee in the succeeding year with date of invoice falling in the succeeding year, the same are processed for payment wherein due deduction of tax at source have been made and remitted to the account of the Central Government within the prescribed time. This is a consistent practice followed by the assessee on year-to-year basis. The fact of the assessee deducting the tax at source in the succeeding year and remitting the same to the account of the Central Government on various dates are enclosed. See case UCO BANK VERSUS UNION OF INDIA OTHERS 2014 (11) TMI 412 - DELHI HIGH COURT We find that in the absence of an ascertainable amount and identifiable payee, the machinery provisions of recovering tax deducted at source falls flat because in either way, it does not aid the charge of tax u/s 4 of the Act, but, takes a form of separate levy independent of other provisions of the Act. Similar view was also taken in yet another decision of the Hon ble Jurisdictional High Court in the case of DCIT vs. Ericcson Communications Ltd. 2015 (9) TMI 507 - DELHI HIGH COURT . Thus we hold that the assessee cannot be treated as an assessee in default for mere book entries passed within the meaning of section 201(1) and consequentially interest u/s 201(1A) is also directed to be deleted. Assessee in default u/s 201(1) and interest u/s 201(1A) levied - short-deduction of tax at source on certain expenditures - HELD THAT - We find that the assessee had explained before the lower authorities that some of the payees had furnished low tax deduction certificate obtained u/s 197 of the Act from their TDS Officer and had furnished the same to the assessee. Accordingly, the assessee had deducted the tax at source in accordance with the rates prescribed in the low tax deduction certificate u/s 197 with effective date mentioned thereon. Hence, it was the case of the assessee that there was no short-deduction of tax made by the assessee at all and that all the taxes have been duly deducted and remitted in accordance with the provisions of Chapter XVII-B of the Act. CIT(A) had merely directed the AO to examine the same and decide the issue accordingly. The assessee is directed to produce the certificates obtained u/s 197 before the ld. AO to justify its case. Accordingly, the issue in respect of short-deduction of tax at source is hereby remitted to the file of the ld. AO. Assessee in default u/s 201(1) and liable for interest u/s 201(1A) - professional expenses incurred by the assessee - HELD THAT - We find that a sum has been transferred by the assessee to Professional charges separately. This clearly acts to prove that the professional expense as already included in the aggregate retainership fee. Hence, the contentions of the Revenue that professional expenses had not been subjected to deduction of tax at source, is factually incorrect. Direct the ld. AO to delete the demand raised on account of professional expenses both u/s 201(1) and u/s 201(1A) of the Act. Assessee in default in respect of rent expenses, retainership fee and search engine marketing expenses - HELD THAT - As stated earlier some of the parties to whom payments were made had furnished lower tax deduction certificate u/s 197 of the Act and some of the parties to whom payments were made were not liable to be subjected to TDS provisions as per the Act. In the interest of justice and fair play, we deem it fit and appropriate to restore this issue to the file of the ld. AO for denovo adjudication qua this aspect of the expenditure.
Issues Involved:
1. Whether the assessee could be treated as an 'assessee in default' under section 201(1) of the Income-tax Act, 1961 for non-deduction of tax at source on year-end provisions for expenses. 2. Whether the assessee could be treated as an 'assessee in default' under section 201(1) of the Act for short-deduction of tax at source on certain expenditures. 3. Incorrect calculation of interest under section 201(1A) of the Act. Summary: Issue 1: Non-deduction of tax at source on year-end provisions for expenses For AY 2013-14, the Revenue argued that the assessee made year-end provisions for expenses amounting to Rs.86,12,471/- without deducting tax at source, thus treating the assessee as 'assessee in default' under section 201(1) and levying interest under section 201(1A). The assessee contended that the payees were not identifiable at the year-end, and the provisions were reversed in the next financial year when invoices were received, and tax was duly deducted and remitted. The Tribunal, relying on the jurisdictional High Court's decisions in UCO Bank vs. Union of India and DCIT vs. Ericsson Communications Ltd., held that in the absence of an ascertainable amount and identifiable payee, the assessee cannot be treated as 'assessee in default' for mere book entries. Consequently, the interest under section 201(1A) was also deleted. For AY 2014-15, the Tribunal applied the same rationale as in AY 2013-14, holding that the assessee could not be treated as 'assessee in default' for non-deduction of tax at source on year-end provisions for expenses. Issue 2: Short-deduction of tax at source on certain expenditures For AY 2013-14, the Tribunal noted that out of the total TDS demand of Rs.23,03,028/-, Rs.14,41,781/- was due to short-deduction of tax on certain expenditures. The assessee argued that tax was deducted based on lower tax deduction certificates obtained under section 197. The Tribunal remitted the issue to the Assessing Officer (AO) for verification of these certificates. For AY 2014-15, the Tribunal found that the assessee had deducted tax on an aggregate amount of Rs.1,70,71,786/- under 'Retainership fee,' which included Rs.54,71,186/- transferred to 'Professional charges.' The Tribunal directed the AO to delete the demand related to professional expenses. Additionally, the Tribunal restored the issue of rent expenses, retainership fees, and search engine marketing expenses to the AO for de novo adjudication, allowing the assessee to furnish fresh evidence. Issue 3: Incorrect calculation of interest under section 201(1A) For AY 2014-15, the Tribunal noted that the issue of incorrect calculation of interest under section 201(1A) was consequential and restored it to the AO to recalculate in accordance with law after considering the Tribunal's directions on other grounds. Conclusion: The appeal for AY 2013-14 was allowed for statistical purposes, and the appeal for AY 2014-15 was partly allowed for statistical purposes.
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