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TMI Blog2013 (5) TMI 310X X X X Extracts X X X X X X X X Extracts X X X X ..... idiary of its holding company M/s Tata Tele Services Limited (TTSL). The assessee company entered into agreements with TTSL and Tata Tele Services (Maharashtra) Limited (TTML) as per which the assessee company would tie up with various contents and value added service provider and obtain from them rights to provide various contents and value added services to the subscribers of TTSL and TTML. As per the terms of the agreement, the charges collected by TTSL and TTML from their subscribers for these services shall be shared between the assessee and TTSL/TTML as per the ratios stipulated in the service agreement. For the assessment year under dispute the assessee filed its return of income declaring a total income of Rs. 26,34,447/-. In the course of scrutiny assessment proceedings, the Assessing Officer from the final account found that the assessee has shown access charges of Rs.24, 94,15,467/- under the direct expenses in the profit and loss a/c. Referring to the schedule-1 Note 2.5 and 8(c) . In note 2.5, it is stated that the access charges represent the cost incurred by the company in obtaining the rights to access various contents on value added services by the third party cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccess charges payable was a provision and on the same breath claimed that the same should be allowed as deduction. Even the provisions made was also not on actuals but on estimate basis. The Assessing Officer further observed that the parent company TTSL and TTML identify and intimate the assessee of the revenue due to it on the basis of usage by the consumers of TTSL and TTML. Based on this revenue identification, the assessee company in turn intimates the service provider as to the quantum of service provided by them based on which they draw up the invoice/bill on the assessee company. The Assessing Officer observed that unless and until the assessee company informs the service provided of the services availed, the bill /invoice of the same cannot be raised. Hence, the payment for the services has not accrued and become due. The Assessing Officer held that as the assessee follows mercantile system of accounting the expenses which are not yet accrued and became due cannot be allowed as a deduction for the assessment year under dispute. The Assessing Officer further held when it comes to disallowance of expenditure u/s 40(a)(ia) due to non deduction of tax at source, the assessee h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,44,976/- provided in the month of March included the expenses payable for the month of March and not to any earlier month, the assessee could not substantiate it. The CIT (A) held that when the very claim of deduction is not admissible as the amount claimed is only a provision in absence of particular details the assessee cannot be given the benefit of payment of Rs. 6 crores before the due date of filing of the return of income as it is not known whether the TDS so paid pertains to the expenses/payment for the month of March, 2006 only and not to any earlier month of the relevant financial year. On the aforesaid finding, the CIT (A) sustained the disallowance of expenditure claimed. 7. Aggrieved, the assessee carried the matter in appeal before us. 8. The learned AR has filed written submissions more or less reiterating the submissions made before the CIT(A). The learned AR submitted that the provision for the expenditure was made on the matching concept principle of accountancy. The learned AR submitted that the audited financial statements were finalized on 16/05/2006. In view of the general delay in submission of invoices by content service providers, the assessee had no opt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... greements the assessee has worked out the provision made for access charges payable. 9. The learned Departmental Representative strongly supporting the orders of the revenue authorities submitted that when the assessee has only made provision for expenditure and that too on estimate basis, the same cannot be allowed. The learned Departmental Representative submitted that when the liability is not ascertained and the persons to whom payments to be made are not identifiable the provision made cannot be allowed as an expenditure. 10. We have considered the submissions of the parties and perused the orders of the revenue authorities along with other materials on record. We have also examined the judicial pronouncements placed before us. It is evident from the orders of the lower authorities that the provision for the expenditure claimed on account of access charges payable has been disallowed as it is in the nature of provision only and is not an ascertained liability. Whereas, it is the contention of the assessee that the provision has been made under the matching concept principle of accountancy and the same has accrued during the relevant financial year though the exact quantifica ..... X X X X Extracts X X X X X X X X Extracts X X X X
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