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TMI Blog2019 (12) TMI 666X X X X Extracts X X X X X X X X Extracts X X X X ..... d are of the opinion that the assessee is under no obligation to make payment and no TDS is deducted and accordingly we direct the AO to delete the addition and allow the grounds of appeal of the assessee. - ITA No.106/Bang/2019 - - - Dated:- 27-11-2019 - SHRI B.R. BASKARAN, ACCOUNTANT MEMBER AND PAVAN KUMAR GADALE, JUDICIAL MEMBER For the Appellant : Smt. Suman Lunkar, CA. For the Respondent : Shri Pradeep Kumar, CIT(DR) ORDER Per PAVAN KUMAR GADALE, JM : The assessee has filed appeal against the order of the CIT(A), Bangalore-9, Bangalore, passed u/s 143(3) and 250 of the Income-tax Act,1961 ['the Act' for short]. 2. At the time of hearing, ld. AR submitted that ground No.1 is general in nature, whereas ground Nos.2.1 to 2.4 are in respect of deduction u/s 80-IB(10) of the Act and ground No.3.1 to 3.3 are in regard to disallowance u/s 40(a)(ia) of the Act and ground No.4 is respect of interest levied u/s 234A and 234B of the Act. 3. Brief facts of the case are that the assessee is a partnership firm engaged in the business of developing and constructing residential and commercial building p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0IB of the Act and second disallowance of provision for expenses u/s 40(a)(ia) of the Act. On the first disputed issue, the ld. AR submitted that the disputed issue is dealt by the Hon ble Tribunal in favour of the assessee in assessee s own case for assessment year 2009-10 in ITA No.487 654/Bang/2013 dated 11/4/2014, Page 9 10. We found the claim of deduction u/s 80IB of the Act was dealt in Revenue s appeal in paras.10 and 11 which reads as under: 10.3.1 We have heard the rival contentions and perused and carefully considered the material on record, including the judicial decision relied on by the learned Authorised Representative of the assessee (supra). We find that the single issue in Revenue's appeal, against the allowability of proportionate deduction under section 80 IB(10) of the Act, was considered and held in favour of the assessee by a coordinate bench of this Tribunal in the assessee's own cast for Assessment Yecr 2009-10(supra) wherein at pare 11 thereof it has been held as under :- 11. We have considered the rival submissions. As far as the appeal of the revenue is concerned, we are of the view that the question. as to whether deduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. We heard the rival submissions and perused material on record. The issue in appeal relates to the liability of the assessee-company to deduct tax at source on provisions made as at the end of the accounting year. The undisputed fact is that the provisions, made at the end of the accounting year are reversed in the beginning of the next year. No payees are identified. The exact amount of liability also cannot be quantified. The provisions are made merely on for Management Information System. In our considered opinion, liability to deduct tax at source does not arise. In identical circumstances, the Hon ble Tribunal in the case of M/s.Bosch Ltd. vs. ITO in ITA No.1583/Bang/2014 dated 01/03/2016, to which one of us i.e. the Accountant Member is the author of the order, held as follows: 9. The undisputed facts in this case are that he provisions were made at the end of the year and the same were reversed in the beginning of the next accounting year. The short point that arises for our consideration is whether the liability for deduction of tax at source has arisen the moment the amount is credited in the books of accounts. Having regard in the scheme of tax deducted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns, i.e section 4,5 and 9. This reasoning flows from the words sum chargeable under the provisions of the Act in section 195 (1). The fact that the Revenue has not obtained any information per se cannot be a ground to construe section 195 widely so as to require deduction of TAS even in a case where an amount paid is not chargeable to tax in India at all. We cannot read section 195, as suggested by the Department, namely, that the moment there is remittance the obligation to deduct TAS arises. If we were to accept such a contention it would mean that on mere payment income would be said to arise or accrue in India. Therefore, as stated earlier, if the contention of the Department was accepted it would mean obliteration of the expression sum chargeable under the provisions of the Act from section 195(1). While interpreting a section one has to give weightage to every word used in that section. While interpreting the provisions of the Income Tax Act one cannot read the charging sections of that Act de hors the machinery sections. The Act is to be read as an integrated code. Section 195 appears in Chapter XVII which deals with collection and recovery. As held in the case of CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 195(2) provides a remedy by which a person may seek a determination of the appropriate proportion of such sum so chargeable where a proportion of the sum so chargeable is liable to tax. The entire basis of the Department s contention is based on administrative convenience in support of its interpretation. According to the Department, huge seepage of revenue can take place if persons making payments to non-residents are free to deduct TAS or not to deduct TAS. It is the case of the Department that section 195(2) , as interpreted by the High Court would plug the loophole as the said interpretation requires the payer to make a declaration before the Income tax Officer (TDS) of payments made to non-residents. In other words, according to the Department, section 195(2) is a provision by which the payer is required to inform the Department of the remittances he makes to non-residents by which the Department is able to keep track of the remittances being made to non-residents outside India. We find no merit in these contentions. As stated hereinabove, section 195(1) uses the expression sum chargeable under the provisions of the Act . We need to give weightage to those words. Further, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the resident party making the payments. The said composite contract not only comprised supply of plant, machinery and equipment in India, but also comprised the installation and commissioning of the same in India. It was admitted that the erection and commissioning of plant and machinery in India gave rise to income taxable in India. It was, therefore, clear even to the payer that payments required to be made by him to the non-resident included an element of income which was exigible to tax in India. The only issue raised in that case was whether TDS was applicable only to pure income payments and not to composite payments which had an element of income embedded or incorporated in them. The controversy before us in this batch of cases is, therefore, quite different. In Transmission Corporation case (1999) 239 ITR 587 (SC) it was held that TAS was liable to be deducted by the payer on the gross amount if such payment included in it an amount which was exigible to tax in India. It was held that if the payer wanted to deduct TAS not on the gross amount but on the lesser amount on the footing that only a portion of the payment made represented income chargeable to tax in India t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held as follows; That the subsequent agreement had altered the rate of commission in such a way as to make the income which really accrued to the assessee different from what had been entered in the books of account. This was nota case of a gift by the assessee to the managed companies of a portion of income which had already accrued, but an agreement to receive a lessor remuneration than what had been agreed upon. The assessee had in fact received only the lesser amount in spite of the entries in the account books, and this lesser amount alone was taxable. Income-tax is a levy on income. Though the Income-tax Act, takes into accounts two points of time at which the liability to tax is attracted, viz. the accrual of the income or its receipt, yet the substance of the matter is the income. If income does not result at all, there cannot be a tax, even though in book-keeping, an entry is made about a hypothetical income;, which does not materialize. Where income has, in fact, been received and is subsequently, given up in such circumstances that it remains the income of the recipient, even though given up, the tax may be payable. Where, however, the income can b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 195 of the Act wherein obligation of a person to deduct tax at source would be applicable to the income chargeable under the Act . Absence of such words chargeable to tax under the provisions of section 194A of the Act would not empower the authorities to invoke the provisions of section 201(1) and 201(1A) of the Act ignoring the words any income by way of interest. Respectfully following the above order, we hold that the assessee-company is not liable to deduct tax at source as no income has accrued in the hands of the payee. 7. In the result, the appeal filed by the assesseecompany is allowed. We also support our view relying on the decision of the Hon ble Gujarat High Court in the case of Principal CIT vs. Sanghi Infrastructure Ltd. (257 Taxman 371)(Guj.) where provision for expense claim was held as under: Where provision was made by assessee for expenses for which bills were not received during year under consideration, no section 40(a)(ia) disallowance could be made for nondeduction of TDS. In the present case, no bills and invoices were raised by the creditors and no liability of payment arose. Hence we, followed the judicial ..... X X X X Extracts X X X X X X X X Extracts X X X X
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