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TMI Blog2025 (2) TMI 913X X X X Extracts X X X X X X X X Extracts X X X X ..... - AO has disallowed the year end provision debited on the last day of accounting - HELD THAT:- Provision has been reversed and credited back on the next day and such expenditure has been debited on the basis of actual bill and TDS deducted, wherever applicable in the next financial year. We find that the issue whether TDS is to be deducted on year-end provisions which is reversed on the first day of the subsequent year has been decided in the case of Subex Ltd. [2023 (1) TMI 778 - KARNATAKA HIGH COURT] held if no income is attributable to the payee there is no liability to deduct tax at source in the hands of the tax deductor. The existence or absence of entries in the books of accounts is not decisive or conclusive factor in deciding the right of the assessee claiming deduction. See KEDARNATH JUTE MANUFACTURING COMPANY LIMITED [1971 (8) TMI 10 - SUPREME COURT] - Decided in favour of assessee. Nature of expenses - Disallowance of club expenses - AO has made disallowance of entry fee/subscription charges paid by the assessee on the ground that the said expenditure is capital expenditure - HELD THAT:- The assessee has incurred club expenses and claimed as revenue expenditure. The A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A)/AO has erred in proposing to make an addition under section 40(a)(ia) of the Act on account of alleged non-deduction of tax on the discount extended to prepaid distributors, amounting to INR 1,633,352,748. 2.2 On the facts and circumstances of the case and in law, the learned CIT(A)/AO has erred in concluding that the relationship between the Appellant and its pre-paid distributors is that of a 'Principal and Agent'. 2.3 Without prejudice to the above grounds, on the facts and circumstances of the case and in law, the learned CIT(AVAO has erred in not holding that no disallowance can be made under section 40(a)(ia) of the Act since the Appellant is of a bonafide belief that no tax was required to be deducted at source on discount extended to pre-paid distributors; 2.4 Without prejudice to the above grounds, on the facts and circumstances of the case and in law, the learned CIT(A)/AO has erred in not restricting the disallowance urider section 40(a)(ia) of the Act to the amount which remains payable at the end of the year, which stands at 'NIL". 2.5 Without prejudice to the above grounds, on the facts and circumstances of the case and in law, the learned CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcumstances of the case and in law, the learned CIT(A)/AO has erred in making an addition of INR 58,337 towards club entrance fees/ subscription charges paid by the Appellant by holding the same as expenditure of capital nature. The Appellant craves leave to add, alter, amend or withdraw any of the above grounds at or before the hearing of the appeal." 3. Ground No.1 is general in nature hence, no adjudication is required for the same. 4. Ground No.2 is against disallowance of discount extended to prepaid distributors of Rs. 1,633,352,748/- u/s. 40(a)(ia) of the Act. 4.1 The assessee has paid Rs 163,33,52,748 to its various distributors of prepaid SIM cards/recharge coupons. This amount represents the difference between MRP of the talk time and prepaid connections and the price at which these are transferred to pre-paid distributors and discount in nature. A.O has made disallowances of discount extended by the assessee company to various distributors of prepaid SIM Card/Recharge coupon u/s 40(a)(ia) of the Act on the ground that assessee was required to deduct TDS under section 194H on such discount. The Ld. CIT(A) has confirmed the disallowances relying on the order of ITAT, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act. The Ld CIT(A) confirmed the disallowances. 5.2 The Ld. AR before us has submitted that the TDS is not deductible on the year end provision as it is just accounting entry for matching principle to arrive at correct profit of the year as per accounting principle. The AR argued that the provision has been reversed on the next day at the beginning of financial year. The Ld AR has submitted that this issue is covered in favour of the assessee by the decision of Hon'ble Karnataka High Court in the case of Subex Ltd. vs. DCIT [2023] 148 taxmann.com 271 (Karnataka) and the order of Hon'ble ITAT, Mumbai Bench in the case of Mahindra & Mahindra Ltd. v. DCIT [2012] 24 taxmann.com 267 (Mumbai-Trib.). 5.3 The Ld. Departmental Representative (DR), on the other hand, has relied on the order of Ld. CIT(A). 5.4 We have heard the rival submissions, and perused the materials available on record. The A.O has disallowed the year end provision debited on the last day of accounting u/s 40(a)(ia). The provision has been reversed and credited back on the next day and such expenditure has been debited on the basis of actual bill and TDS deducted, wherever applicable in the next financial yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The ground of appeal is accordingly allowed. 6. Ground No.4 is against the disallowance of club expenses. 6.1 The A.O has made disallowance of entry fee/subscription charges paid by the assessee of Rs. 58,337/- on the ground that the said expenditure is capital expenditure. On appeal, the Ld. CIT(A) relying on the decision of Hon'ble Kerala High Court in the case of Framatone Connector OEN Ltd. v. DCIT 294 ITR 559 (Kerala) has confirmed the above addition. 6.2 The Ld. AR before us has submitted that the issue is covered in assessee's favour by the decision of Punjab & Haryana High Court in the case of CIT v. Groz Beckert Asis Ltd. [2013] 351 ITR 196 (P & H) and the decision of Hon'ble Karnataka High Court in the case of Ingersoll-Rand India Ltd. v. CIT [2020] 427 ITR 158 (Kar.). The Ld. AR has submitted that the Hon'ble Karnataka High Court has considered the decision of Hon'ble Kerala High Court and decided the issue in favour of the assessee. 6.3. The Ld. DR, on the other hand, has relied on the order of Ld. CIT(A). 6.4 We have heard the rival submissions, and perused the materials available on record. The assessee has incurred club expenses of Rs. 58,337 and claimed as rev ..... X X X X Extracts X X X X X X X X Extracts X X X X
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