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TMI Blog2018 (10) TMI 1097X X X X Extracts X X X X X X X X Extracts X X X X ..... , 4, 5 and page 23 of the impugned order passed by ld. ACIT (TDS), Jaipur. 2. That on the f acts and in the circumstances of the case and in law, ld. CIT-A erred in sustaining the action of ld. ACIT (TDS), Jaipur in treating assessee company as defaulter for alleged violation of section 192 of the Act on certain "provisions" made in books, ignoring all the submissions and contentions raised without appreciating the concept of chargeable income qua a recipient which is completely overlooked." 2. The assessee is a company engaged in the business of website development, e-commerce and online sale/purchase of used cars under the domain of 'cardekho.com'. During the course of spot verification conducted on 27th February, 2015 at the business premises of the assessee, it was found that the assessee has debited various expenditures in the Profit & Loss account and had credited these expenses as provisions in the books which were in the nature of perquisites but had not deducted any TDS on these perquisites. The AO in the proceedings under section 201(1)/201(1A) of the Act was of the view that as per the IT Act, TDS is to be deducted on credit or payment, whichever is earlier. Thus the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be given its ordinary literal meaning and, therefore, the person making the payment can or is required to make a deduction towards tax at source only at the time of making such payment. It was specifically held that the accrual of payment and the actual act of making payment must both exist in order that a deduction at source may be made. Hence, the ld. A/R has submitted that the reliance placed by the AO and ld. CIT (A) on the decision of Bangalore Bench of the Tribunal in the case of IBI India Pvt. Ltd. vs. ITO TDS LTU (supra) is misplaced as the said decision was not in respect of the liability of TDS under section 192 of the Act. 3.1. On the other hand, the ld. D/R has relied upon the orders of the authorities below and submitted that there is no dispute that the assessee has not deducted TDS in respect of the various expenditures claimed and debited to the Profit & Loss Account. Therefore, the assessee has recognized these expenditures as accrued during the year under consideration. However, when the assessee has failed to deduct the tax then the assessee cannot escape from the tax liability under section 201(1) and 201(1A) of the Act. The entries in the books of accounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n account of employee stock option plan as it was subject to the exercise of option by the employees and final allotment of shares, therefore, the provisions of section 192 are not applicable on this expenditure. The Hon'ble Delhi High Court in the case of CIT vs. Tej Quebecor Printing Ltd., 281 ITR 170 has considered this issue in para 7 to 11 as under :- "7. Section 192 of the Income-tax Act, inter alia, requires any person responsible for paying any income chargeable under the head "Salaries" to deduct income-tax on the amount payable at the stipulated rate at the time of payment. The term "payment" has not been defined either in section 192 or at any other place of the Act. The expression shall, therefore, have to be given its ordinary literal meaning. It follows that the person making the payment can or is required to make a deduction towards tax at source only at the time of making such payment. The accrual of the payment and the actual act of making the payment must both exist in order that a deduction at source may be made. No deduction at source is contemplated under section 192 in cases where a payment towards salary has accrued but is not made. This position becomes cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 's case (supra). 9. It is, therefore, evident that the Supreme Court was not dealing with a case involving deduction of tax at source under section 192 of the Act. It was, on the other hand, dealing with the question of taxability of the amount credited to the account of the assessee having regard to the provisions of section 5(2)(b) of the Act. The question whether the amount was taxable in the hands of the payee and, if so, for which assessment year is, however, a matter distinctly different from the question of deduction of tax at source under section 192. The majority decision of the Tribunal, therefore, rightly held that the obligation to deduct tax at source did not in the instant case arise as the amount of salary due to the employee had not been paid. 10. Mr. Jolly made a feeble attempt to urge that the salary due to Mr. Garnett had in fact been received by him outside the country and that the plea of nonpayment was raised only to avoid the liability arising out of the non-deduction of tax at source. We see no reason to go beyond the finding of fact recorded by the Tribunal that there was no actual payment of the salary by the assessee to Mr. Garnett. The Tribunal h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions were made for the liability to be discharged in future. This fact has not been disputed by the AO that these are only provisions made on account of Leave encashment, Bonus and Gratuity expenses. Hence in view of the decision of the Hon'ble Delhi High Court in the case of CIT vs. Tej Quebecor Printing Ltd. (supra) when there is no actual payment of these perquisites being part of salary, then the liability to deduct tax at source under section 192 of the Act does not arise. The revenue has relied upon the decision of Bangalore Benches of the Tribunal in the case of IBM India Pvt. Ltd. vs. ITO TDS LTU (supra). However, we find that the issue in the said case was not for deduction of tax at source under section 192 of the Act. The provisions were created by the assessee in the said case on account of various expenditures and the particulars are reproduced by the Tribunal in para 4 as under :- " 4. The provision so created by the Assessee in the books of accounts for the various assessment years are as follows:- F.Y. 2005-06 Particulars Amount Section Percentage Amt to be deducted Interest Sub-contracting charges 196063727 194C 1.13% 210250 1766116 Commissio ..... 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