2017 (12) TMI 1118 - AT - Income Tax

Penalty levied u/s 271C - liable for deduction of tax at source on provisions of Brokerage made in books of account - Held that - TDS was not practically feasible to be deducted by the assessee on the provision so made, and as and when the payments were made to the brokers, TDS was deducted and remitted to the Government. So also is not disputed that no benefit of any provision for expenses was availed by the assessee and due tax was paid in full, as such there is neither tax evasion nor loss of revenue to the Government. The controverted facts establish that because of the peculiarity of the circumstances involved in this matter, namely, at the time of creation of the provision for brokerage expenses, neither the names of the brokers nor the amounts to be paid to them on account of brokerage was a determinable owing to the fluid situation, due to which TDS was not practically feasible to be deducted by the assessee, and more particularly in view of the fact that the assessee neither claimed nor availed any benefit of the provision made for expenses and paid due tax in full, we are of the considered opinion that the findings of the Ld. CIT(A) that there is neither any tax evasion nor loss of revenue to the Government do not suffer any illegality or irregularity, and that this tribunal cannot interfere with the same. - Decided against revenue

Summary

Issues:
1. Deletion of penalty under section 271C of the IT Act, 1967
2. Liability for deduction of tax at source on provisions of Brokerage

Analysis:
1. The appeal was filed by the Revenue against the order of the Ld. CIT(A) deleting the penalty amounting to ?48,42,700/- levied under section 271C of the IT Act, 1967. The assessee, engaged in real estate projects, had made an ad hoc provision for brokerage expenses in the books of accounts. The assessing officer initiated penalty proceedings for non-deduction of TDS on this provision. The Ld. CIT(A) considered that since only an ad hoc provision was made and no actual payment was due at the time of creation of the provision, TDS deduction was not practically feasible. The Ld. CIT(A) held that there was no tax evasion or loss of revenue to the government. The Revenue challenged these findings, but the tribunal upheld the Ld. CIT(A)'s decision, stating that due to the peculiar circumstances where the specific parties and amounts were not determinable at the time of provision creation, TDS deduction was not feasible. As the assessee paid due tax in full and did not avail any benefit from the provision, the tribunal found no illegality in the Ld. CIT(A)'s decision.

2. The second issue pertained to the liability for deduction of tax at source on provisions of Brokerage made in the books of account. The Ld. CIT(A) had held that the assessee was not liable for TDS deduction on the provision for brokerage expenses, considering the peculiar circumstances where no actual payment was due at the time of provision creation. The tribunal, while upholding the Ld. CIT(A)'s decision, emphasized that TDS was deducted and remitted to the government when actual payments were made to the brokers. The tribunal found that no tax evasion or loss of revenue occurred as the assessee paid due tax in full and did not benefit from the provision for expenses. Consequently, the appeal of the Revenue was dismissed, affirming the decision of the Ld. CIT(A) on this issue as well.

In conclusion, the tribunal upheld the Ld. CIT(A)'s decisions on both issues, emphasizing the peculiar circumstances where TDS deduction was not feasible due to the uncertainty of specific parties and amounts at the time of provision creation. The tribunal found no tax evasion or loss of revenue as the assessee paid due tax in full and did not benefit from the provision for expenses. Therefore, the appeal of the Revenue was dismissed, and the decisions of the Ld. CIT(A) were upheld.