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TMI Blog2023 (8) TMI 877X X X X Extracts X X X X X X X X Extracts X X X X ..... d authorised representative does not apply to the facts of the case. However it is also the fact that the assessee has subsequently deducted tax at source on such payment and therefore the assessee is only liable to the extent of interest under section 201(1A) of the act. Accordingly on this issue we confirm the order of the learned assessing officer only to that extent of charging of the interest as the taxes already deducted on such payment and paid albeit late. TDS u/s 194H on Discount given held as commission expenditure - Assessee has also produced before us the details of several sales promotion schemes based on which discounts are offered to the various Distributors. The distributorship agreement clearly states that company shall supply the products on the basis of the order placed by the distributor from time to time and as soon as the products are delivered to the distributor the responsibility of the assessee ceases. As per clause number 4 of the distributorship agreement it is clear that risk and reward of the goods passes on to the distributor from the assessee as soon as the goods are delivered to the distributor. Therefore it is an agreement having a relationship ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,000 on which TDS default under section 201 (1) is of ₹ 39,920,000/ and interest under section 201 (1A) of ₹ 37,125,600 failure to deduct tax at source on year end provisions of ₹ 13,30,43,607/ on which TDS default under section 201 (1) is determined at ₹ 1,23,93,752 and interest under section 201 (1A) of ₹ 10,162,877/ 128/M/2023 2014 15 against appellate order dated 14/11/2022 Failure to deduct tax at source on ESOP of ₹ 4,398,291 and interest thereon under section 201 (1A) of ₹ 3,562,616 Failure to deduct tax on discounts and rebates of ₹ 457,600,000 having a TDS default under section 201 (1) of ₹ 45,760,000 and interest of ₹ 37,065,600 Failure to deduct tax at source on year end provisions of ₹ 210,311,767 on which TDS default under section 201 (1) of ₹ 1,97,79,204 and interest of ₹ 16,218,947 129/M/2023 2015 16 against appellate order dated 14/11/2022 Failure to deduct tax at source on employee share best payment of ₹ 13,709,009 808/- on w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 019 Failure to deduct tax at source on employee share best payment of ₹ 15,773,187/ on which TDS default under section 201 (1) is of ₹ 4,731,956 and interest under section 201 (1A) is of ₹ 5,061,546 Failure to deduct tax at source on discount and rebates of ₹ 38,96,00,000 on which TDS default under section 201 (1) is of ₹ 19,480,000 and interest under section 201 (1, A) is of ₹ 64,28,400 Failure to deduct tax at source on year and provisions of ₹ 450,702,965 on which tax deducted at source default under section 201 (1) is of ₹ 28,005,776 and interest under section 201 (1A) is of ₹ 4,797271/- 133/M/2023 2019 20 appellate order dated 14/11/2022 and order under section 154 of the act dated 31/12/2019 Failure to deduct tax at source on employee share best payment of ₹ 22,471,662 and TDS default thereon under section 201 (1) of ₹ 6,741,499 and interest under section 201 (1A) of ₹ 4,015,715 Failure to deduct tax at source on discount on rebates of ₹ 203,400,000 on which TDS default under section 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applications, liquefied petroleum gas for domestic and commercial applications, other products and special fluids. As there was a significant decrease in the tax deduction at source in case of a company compared to earlier years, verification was conducted by The Deputy Commissioner Of Income Tax (OSD) (TDS), 2 (3), Mumbai at the business premises of the assessee. 08. During the course of verification it was found that:- a. Assessee has incurred expenses on employee share-based payment debited to profit and loss account of ₹ 1.66 crores. Assessee did not deduct any tax at source on the above sum. The reason for non-deduction of the tax was that the employee share-based payments during the financial year 2012 13 a sum of Rs 1 66,32,320 has been paid on account of incentive plans to its employees in the nature of performance shares of TOTAL SA France. This performance shares is awarded become final after the specified three-year vesting period subject to a presence condition and performance condition based on the return on equity. The claim of the assessee was that assessee has made a provision of the above sum on account of employee share-based payments which represent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above sum. The assessee submitted that assessee has made a year end provision for the purposes of the accounts. Assessee makes year end provision on 31st of March of the respective financial year and then reverses the entire provision on first day of the next financial year. Therefore as and when the services are rendered and invoices received, the respective vendors are credited and T D S is deducted on that sum. Thus above provision was created at the end of the year is then reversed on the very first day of the next assessment year. Further provision being sum which are estimates, the assessee contended that it has no responsibility to pay these specific amounts at the time of making this provisions this year and provisions are reversed in the beginning of the subsequent period. Accordingly, as and when the sum is paid to the vendor or credited to the account of the vendor, the appropriate tax is deducted at source. Thus, assessee has submitted that it has made tax deduction at source in the subsequent year whenever vendor is ultimately credited. Assessee also submitted a detailed sheet listing of provision made as at the end of the financial year and reversed in the subseq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counter various market challenges. Commission/discount offered by the assessee is directly linked or related to its liquidity which proves that these are not normal discount offered by the assessee but represents the amount of commission. Accordingly he held that the amount of discount offered is commission in substances and provision of section 194H applies, therefore assessee should have deducted tax at sources on it. Accordingly the learned assessing officer held that assessee has failed to deduct tax at source on discount and rebates amounting to ₹ 399,200,000 under section 194H of the act. 09. Accordingly an order under section 201 (1) /201 (1A) of the act was passed on 11/12/2019 wherein the employee share-based payment of Rs 1,66,32,320/- discount and rebates of ₹ 399,200,000/- and expenses of ₹ 215,069,655/- were held to be subject to tax deduction at source. Assessee was found to be in default for tax deduction at source under section 201 (1) of the act of ₹ 6,64,16,661/ . Interest was also chargeable under section 201 (1A) amounting to ₹ 61,767,495/ . Accordingly the assessee company was directed to pay the above defaulted amount of ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee should have deducted tax at sources. In this case Payees are identified and the amount is also crystallised. Merely non receipt of the bill could not be the reason for non-deduction of tax at source. It was submitted that if the assessee does not have any information that to whom it is payable then how the assessee can make a provision. Provisions can only be made when there is a clear cut liability arising towards some services received by the assessee or some obligation of payment has arisen. Assessee is a company to whom the Companies Act a[[lies and all the expenses are incurred on the basis of accounting policy and method adopted by the assessee, therefore the ld COIT (A) is grossly erred in noting than payees cannot identified. He submits that when assessee itself submits that it is reversed on the very next date, and when the bills of those parties are received tax is deducted, shows that payees are identified. He submits that quantification is also made on the basis of the mandate, work order etc. It cannot be a wild estimate. Hence Assessee should have deducted tax at sources on the year end provisions. He relied up on Biocon Ltd. V Deputy Commissioner of Income-tax, [2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... then reverses the entire provision on first day of the next financial year. Thereafter as and when the invoices are received, the amount is credited to the respective vendor s account and at that particular time the tax is deducted at source on taxes. Therefore in fact the assessee has deducted tax at source on such payment as and when required. It was further stated that at the most the provision made by the assessee can be considered to be estimates made only, on which no taxes required to be deducted. It was further stated that the assessee has already disallowed the above expenditure under section 40 (a) (ia) in the year of provision and considered for deduction in the year of deduction of tax at source and paid income tax liability as per computation in accordance therewith. Assessee has in fact made TDS in the subsequent year and whenever the vendor was ultimately not paid or the provision was excessive, the same has been reversed. Therefore the only default that the assessee is liable to his payment of interest for delayed payment of tax deduction at source and not for complete non-deduction of tax at source. Accordingly, he submitted that the learned CIT A has correctly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that the agreement for distributor with an agent and not on principal to principal basis. Further year end provisions are identified provisions, so decision cited by the ld AR does not apply. 16. We have carefully considered the rival contention and perused the orders of the lower authorities. The only issue involved in this appeal is whether taxes required to be deducted on several payments made by the assessee or provisions of expenditure. a) With respect to the ESOP payment, it would be considered as perquisite of the eligible employees when shares that have been granted, vested in the employees are allotted on exercise of option on completion of the vesting period. Therefore at the time of allotment of shares on the exercise, difference between the fair market value and the value of the shares as on exercise date and the amount that employees have paid is calculated and taxed accordingly. The difference is subject to tax in the hands of assessee. This is the provision of taxation of perquisites in the hands of employees u/s 17 (2) (vi) of the Act. Provisions of TDS are enacted with the basic objective of pay [tax] as you earn . Further TDS is considered as advance t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to a payee. If payee is not indentified we failed to understand how and what basis the provisions are made. It is not the case that assessee is making a provision without any basis. Such a provision is a violation of accounting standards, accounting policy of the company and against provisions of the companies Act! As per accounting standard 29 the provision cannot be made unless the payee is identified. Therefore the various judicial precedents relied upon by the learned authorised representative does not apply to the facts of the case. However it is also the fact that the assessee has subsequently deducted tax at source on such payment and therefore the assessee is only liable to the extent of interest under section 201(1A) of the act. Accordingly on this issue we confirm the order of the learned assessing officer only to that extent of charging of the interest as the taxes already deducted on such payment and paid albeit late. c) On the third issue of discount given by the assessee of ₹ 399,200,000 which were held by the learned AO as commission expenditure subject to tax deduction at source under section 194H of the act. We find that this issue is squarely covered in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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