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TMI Blog2017 (10) TMI 1565X X X X Extracts X X X X X X X X Extracts X X X X ..... ), LTU Bangalore in treating the appellant as 'assessee in default' under section 201(1) without ascertaining whether deductees have also failed to pay the tax directly. 2.3 The learned CIT(A) LTU Bangalore has erred in not appreciating that deductor cannot be regarded as 'assessee in default' under section 201(1) without demonstrating that the deductee has also not paid the tax directly as per the mandate of Explanation to section 191 of the Act. 2.4 The learned CIT(A) LTU Bangalore has erred in not appreciating that since the deductees would have filed the return of income/paid the taxes, the appellant cannot be deemed to be 'assessee in default' under section 201 of the Act. 2.5 On facts and in the circumstances of the case and law applicable, the order passed by the CIT(A) LTU and the order passed under section 201 without satisfying the requirements of section 191 and Explanation thereof is bad in law and liable to be quashed. 3.1 Assuming without admitting that the appellant can be regarded as 'assessee in default' under section 201, the learned Income tax officer TDS, LTU, Bangalore has erred in raising the demand on the appellant to r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting to Rs. 8,71,32,988/- be held as not liable for TDS; c) interest levied under section 201(1A) be deleted; d) interest levied for delayed remittance be deleted; e) demand of Rs. 76,10,879/- be cancelled. The appellant prays accordingly." 3. It was submitted by ld. AR of assessee that although so many grounds are raised but issue involved is only one as to whether the assessee can be considered as an assessee in default for not deducting TDS in respect of those provisions which were reversed. He submitted that the decision of the CIT(A) in this aspect is as per para Nos. 6 to 8 of its order. He placed reliance on judgment of Hon'ble Karnataka High Court rendered in the case of Karnataka Power Transmission Corporation Limited Vs. DCIT as reported in 383 ITR 59 copy available on pages 182 to 191 of paper book. Thereafter he submitted that the relevant page is 185 of paper book where the facts are noted by Hon'ble Karnataka High Court. He pointed out that as per the facts noted in para No. 2 of the judgment, provisions were created by book entries towards contingent interest payable for assessment years 2005-06 and 2006-07 and a corresponding reversal entries were m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payments on which the TDS was not deducted by assessee. The details of such expenses and TDS amount is as under. 6. The AO also added interest u/s. 201(1A) of Rs. 14,18,327/- along with interest on delayed remittance of Rs. 25,915/- and raised demand of total Rs. 76,10,879/-. Being aggrieved, the assessee placed the matter in appeal before the CIT(A) but without success. The decision of CIT(A) is as per para Nos. 6 to 8 of his order which are reproduced herein below for the sake of ready reference. "6. Coming to the provisions of the IT Act, it is clear that ordinarily tax is to be deducted from the amount paid or credited to the party's account. However, sub-section (2) to Sec. 194C, explanation (ii) to Sec. 194-I, explanation (c) to section 194J and explanation (1) to section 195 provide that even if the sums referred to under these provisions are credited to any account, whether called 'Suspense Account' or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of TDS shall apply accordingly. This means, in effect, that even the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e before me I find that in the months immediately following the close of FY 2011-12 the appellant has deducted tax from the payments made as per invoices received. In those cases where TDS has already been deducted the demand u/s. 201(1) will lead to a double demand for the same amount and this is inconsistent with law and fairness. However, where the provisioned amount was higher than the invoice amount, the balance has clearly not suffered tax. Since it has been held supra that the liability for tax deduction existed on the company at the time of making the provision, the default for non-deduction of tax at source is to be limited only to the surplus over and above the invoice amount. The appellant will furnish the details in this regard to the AO who will consider them and limit the default calculation accordingly." 7. In the light of these facts, we examine the applicability of various judgments on which reliance has been placed by ld. AR of assessee. The first judgment cited by him is a judgment of Hon'ble Karnataka High Court rendered in the case of Karnataka Power Transmission Corporation Limited Vs. DCIT (supra). As per the facts noted in para No. 2 of this judgment, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year. The major reversal of Rs. 2,93,03,081/- on account of payment to contractors and Rs. 1,30,82,760/- on account of payment towards professional or technical services is on 25.02.2013 i.e. towards the end of the next accounting year. The date of reversal is very much important to decide as to whether the income has accrued to the payee or not because at para No. 9 of this tribunal order cited by ld. AR of assessee having been rendered in the case of M/s. Bosch Limited Vs. ITO (supra), the basis of this decision is this that liability for deduction of tax at source arises only when there is accrual of income in the hands of the payee. When the provision is made at the end of the accounting year and the reversal is made at the very beginning in the next accounting year then there may be a case of income not accruing to the payee and the provisions is made in the books of accounts even before the income has accrued to the payee. But in the present case, the reversal is not in the beginning of the next accounting year and therefore, it is not acceptable that the income has not accrued to be payee and still the assessee waited for this 6 months minimum to 22 months maximum for rever ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and therefore, the tax-deductor-assessee were duty bound to deduct tax at source u/s. 192(1) from the Home Salary/special allowance(s) paid abroad by the foreign company, particularly when no work stood performed for the foreign company and the total remuneration stood paid only on account of services rendered in India during the period in question. However the penalty proceedings u/s. 271C were quashed. 11. In the present case, there is no dispute regarding penalty proceedings u/s. 271C and regarding the liability u/s. 201 and 201(1A) of IT Act, this judgment of Hon'ble Apex Court does not help the assessee. 12. Now we examine the applicability of tribunal order rendered in the case of IBM India (P.) Ltd. Vs. ITO (supra) cited by ld. DR of revenue. In this case, it was held by tribunal that assessee would be liable to deduct tax on provision for expenses created in books of accounts. The tribunal also held that when the assessee has admitted his default u/s. 40(a)(i) and 40(a)(ia), in the proceedings u/s. 201 and 201(1A), the assessee cannot argue that there was no liability under chapter XVII-B. This tribunal order supports the case of the assessee because in the present ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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