2023 (4) TMI 811 - AT - Income Tax

Non-deduction of TDS on provision made for Misc. and conference expenses and Business development conference expenses - Default u/s. 201(1)/201(1A) - assessee submitted that the provision is made for certain expenses wherein the payees are not identifiable at the time of making provision. Hence deduction of tax at source could not be made on the same - HELD THAT - The deductee had filed the return of income for the Ay in which the invoices were raised in the AY immediately succeeding the year in which the provisions were created and had included the amounts received on account of these expenses including the amount of provisions created by the appellant in the total income for the year under consideration and also paid taxes thereonA copy of the certificate of the Accountant under first proviso to sub-section 1 of section 201 filed by the appellant in this regard is enclosed as Annexure-1 to this order. The appellant contention that in view of the decision of Hindustan Coca-Cola Beverage (P.) Ltd. 2007 (8) TMI 12 - SUPREME COURT and in view of the CBDT Circular No. 2758201/95-IT/B dated 29/01/1997, the demand raised w/s 201(1) may be deleted is aggreable. It is a fact on record that the amounts of provisions created by the appellant on which TDS was not deducted had been duly included by the deductee in the return of income filed for the year in which the amounts were actually received by the deductee and in which the invoices were raised. As such no demand u/s 201(1) is justified - The demand raised us 201(1) is accordingly deleted. Since the Department was deprived of the TDS amount in time, that is till the date of filing the return of income by the payee, the interest u/s. 201 (1A) would be eligible to be paid by the assessee. No infirmity in the order of the ld. CIT(A) granting the relief to the assessee in respect of demand raised u/s 201(1) of the Act and confirming the action of levy of interest u/s. 201(1A) of the Act. Decided in favour of assessee.

Summary

Issues involved:
The only issue to be decided in this appeal is whether the ld. CIT(A) was justified in deleting the demand raised on account of non-deduction of TDS on provision made for certain expenses without deduction tax at source u/s. 201(1)/201(1A) of the Act.

Details of the Judgment:

Issue 1: Non-deduction of TDS on certain expenses

The appeal arose from a TDS survey revealing non-deduction of TDS on provisions made for expenses where payees were not identifiable at the time of making the provision. The ld. AO treated the assessee as in default under u/s. 201(1) of the Act and raised a demand, along with charging interest u/s. 201(1A) of the Act. The expenses in question were for miscellaneous and conference expenses amounting to Rs. 4 crores and business development conference expenses of Rs. 5 crores. The ld. CIT(A) deleted the demand, citing that the payees had included the receipt in their Income Tax returns, causing no loss to the exchequer. The ld. CIT(A) referenced the case of Hindustan Coca-Cola Beverage (P.) Ltd. and CBDT Circular No. 2758201/95-IT/B to support the deletion of the demand u/s. 201(1) of the Act.

Issue 2: Interest under u/s. 201(1A) of the Act

Although the demand u/s. 201(1) was deleted, the interest u/s. 201(1A) was upheld by the ld. CIT(A) since the Department was deprived of the TDS amount until the payee filed their income tax return. The ld. CIT(A) considered the decision of the Hon'ble Supreme Court in Hindustan Coca-Cola Beverage (P.) Ltd. while confirming the levy of interest u/s. 201(1A) of the Act. The appeal of the revenue was ultimately dismissed, affirming the relief granted to the assessee regarding the demand u/s. 201(1) of the Act but upholding the interest under u/s. 201(1A) of the Act.

In conclusion, the ld. CIT(A) decision was upheld, and the appeal of the revenue was dismissed, with the order pronounced in the open court on 18/04/2023.