Income Tax Appellate Tribunal - Hyderabad
Dy.Cit, Circle-14(2),, Hyderabad vs M/S Ntt Data India Enterprises Services ... on 23 August, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH "A", HYDERABAD
BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER
AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER
ITA No. 312/Hyd/2013
Assessment Year: 2009-10
Dy. Commissioner of Income- Vs. M/s NTT Data India
tax, Circle - 14 (2), Hyderabad. Enterprises Application
Services Pvt. Ltd., Hyderabad.
PAN - AAACI7064D
(Appellant) (Respondent)
Revenue by : Smt. Suman Malik
Assessee by : Shri Chavali Narayana
Date of hearing : 01-08-2017
Date of pronouncement : 23-08-2017
O RDE R
PER S. RIFAUR RAHMAN, A.M.:
This appeal filed by the assessee is directed against the order of the learned Commissioner of Income-tax (A) - II, Hyderabad, dated 11/12/2012 for AY 2009-10.
2. Briefly the facts of the case are that the assessee is in the business of providing software services. There was a survey u/s 133A on 02.02.2009 to verify the adherence of TDS provisions by the assessee. During the course of scrutiny proceedings, it was noticed that the assessee had shown provision of Rs.2,12,85,666/ - for payments to be made for various contract services and professional services as on 31.03.2009. Since the assessee failed to furnish breakup of the above expenses out of the provisions made and also the details of TDS made and the remittance of the same, the Assessing Officer calculated TDS payable u/s.194C and 194J and 2 ITA No. 312/H/13 M / s N T T D a t a I n d ia E n t e r p r is e s A p p l ic a t i o n S e r v ic e s P v t . L t d .
raised a demand of Rs.16,69,524/- u/s 201(1) and Rs.3,67,295/- u/s 201(1A) of the Act.
3. Aggrieved by the order of AO, the assessee preferred an appeal before the CIT(A).
4. During the appeal proceedings it was submitted that it has made provision Rs. 2.12,85,866/ - towards expenses in the books of accounts enclosing its books of accounts for the F.Y. ending 31.03.2009 and the same were adhoc provisions made towards various expenses on an estimation basis while closing the books of accounts for the year ending 31.03.2009. This is the accounting treatment the assessee has been following consistently. It makes adhoc provisions of estimated expenses without crediting the same to any specific vendor account. The following is the accounting treatment, being consistently followed by the Appellant company, towards the year end provisions -
• Make ad-hoc provisions of estimated expenses without crediting the same to any specific vendor account.
• The entire provision so made was disallowed under section 40(a)(ia) in computing taxable income of the Company while filing corporate return of income.
• The said provision is subsequently reversed in the immediately following month.
• As and when the bills/ invoices are received from various parties / beneficiaries, necessary entry is passed in the books of account along with necessary TDS liability, if any.
• The said TDS liability is discharged within the due date, considering the date of passing credit entry of TDS as base. Wherever the TDS is remitted late / after due date, the same is deposited along with interest due thereon.
4.1 In view of the above, It was submitted that as the Company could not ascertain the beneficiaries for the year end provisions, the tax deduction mechanism could not be put into service and tax was 3 ITA No. 312/H/13 M / s N T T D a t a I n d ia E n t e r p r is e s A p p l ic a t i o n S e r v ic e s P v t . L t d .
accordingly not withheld on the said provision. The assessee relied on the Honble ITAT Mumbai's decision in the case of lDBI Vs. ITO (293 ITR 267) and also in the case of Pfizer Ltd. Vs. ITO (TDS) in ITA No. 1667 /Mum/2010.
5. The CIT(A) asked the assessee to produce copy of ledger account to support the contention that the provision has been reversed in the next year and TDS has been deducted as and when the expenditure was incurred in the subsequent year. It had also been requested to furnish a copy of statement of computation of income to substantiate the claim that the provision has been disallowed while computing taxable income for the year under consideration. The appellant had submitted the statement showing computation of income wherein the amount of Rs.2,12,85,666/- had been added under the head 'Expenses disallowed u/ s.40(a)(ia) on provision of expenses' to the profit. A statement enclosed to form 3CD had been furnished wherein the tax deductible and not deducted at all is submitted. Further, the assessee also produced a certificate issued by M/s Vinay K. Goel & Associates, CAs, dated 10/12/2012 wherein it was submitted that the assessee had accounted for an adhoc provision towards various expenses in the books of account for the year ending 31 st March 2009 amounting to Rs. 2,12,85,666/- and the same is reversed in the subsequent financial year.
6. After verifying all the details submitted by the assessee, the CIT(A) held that the assessee has not claimed the expenditure which was provided on 31/03/2009 in the books of accounts in the computation of income and the contention that TDS cannot be made when deductee of the amounts is not ascertainable appears to be correct in view the decisions of ITAT Mumbai Bench in the case of lDBI Vs. ITO and also in the case of Pfizer Ltd. Vs. ITO (TDS) (supra), on which reliance is placed by the assessee. Accordingly, the CIT(A) directed the AO to delete the demand raised u/s 201(1) and 201(1A) r.w.s. 194C and 194J of Rs. 20,36,819/-.
4 ITA No. 312/H/13M / s N T T D a t a I n d ia E n t e r p r is e s A p p l ic a t i o n S e r v ic e s P v t . L t d .
7. Aggrieved by the order of the CIT(A), the revenue is in appeal before us raising the following ground of appeal:
" 1. The CIT(Appeals) erred on relying the case of Pfizer India Ltd that under section 40(a)(ia) of the Income Tax Act, 1961 that once the disallowance is made, the same cannot be subject to the provisions of section 201(1). Both the sections are Independent and not inter chargeable."
8. Ld. DR relied on the order of AO.
9. Ld. AR, on the other hand, besides relying on the order of CIT(A), relied on the following cases:
1. Pfizer Ltd. Vs. ITO (TDS) [2012] 28 Taxmann.com 17 (ITAT Mumbai).
2. Bosch Ltd. (ITA No. 1583(BNG)/2014) ITAT Bangalore, dated 01 March, 2016.
3. Karnataka Power Transmission Corporation Ltd. Vs. DCIT [2016] 383 ITR 59 (Karnataka HC)
4. TE Connectivity India Pvt. Ltd., Vs. ITO (LTU) (TDS) (ITA No. 3/Bag/2015, dated 25 May, 2016
5. ACIT Vs. Tecumseh Products India P. Ltd., ITA No. 388/Hyd/2013, order dated 17 October 2014.
10. Considered the rival submissions and perused the material facts on record as well as the decisions cited by the ld. AR of the assessee. In the case of Tecumseh Products India P. Ltd., the coordinate bench of ITAT, Hyderabad, on similar issue, held as under:
6. We have considered the issue and examined the rival contentions. There is no dispute with reference to the fact that assessee has only made the provisions without identifying the parties as a liability in the year and actual amounts were credited in a later year on which TDS was made. It is also a fact that in the computation of income, assessee has added back the entire provision and has not claimed any deduction. These facts are similar to the facts of Pfizer Ltd. (supra), relied on by the CIT(A) and the decision was extracted as part of the order of Ld. CIT(A). We fully agree with the findings of the Ld. CIT(A) on the issue that there is no scope for deducting tax, as the amounts are not covered by the provisions of section 194C to 194J. Not only that A.O. has only raised the interest under section 201(1A) and has not raised the basic demand under section 201(1). This aspect was also considered by the Ld. 5 ITA No. 312/H/13 M / s N T T D a t a I n d ia E n t e r p r is e s A p p l ic a t i o n S e r v ic e s P v t . L t d .
CIT(A) that assessee was not held as 'assessee in default' and therefore, on this reason also interest cannot be levied as the amount to be deducted has not even quantified under section
201. AO was also not correct in levying interest up to the date of order while accepting that the amounts provided were reversed in later year and TDS was made on actual claims made in that year.
7. Learned D.R. however, relied on the Coordinate Bench decision in the case of Agreenco Fibre Foam (P) Ltd., vs. ITO (TDS), Kannur (supra). The facts in the said case are that assessee is a Private Limited Company and credited interest to the sister concerns during the year under consideration without deducting tax at source. Not only that A.O. treated Assessee as 'assessee in default' and raised demand under section 201 of the Act equal to the amount of tax deductible at source. Thereafter, A.O. levied interest under section 201(lA) to the tune of Rs.7,16,290. It was the finding of the ITAT that even though the amounts were disallowable under section 40 (a)(ia) as assessee did not claim the same as expenditure at all, assessee shall be liable to deduct tax at source under section 194A of the Act on the interest amount so paid/ credited as the said payment was liable to tax deduction at source. The Bench distinguished the decision of the Pfizer Ltd. vs. ITO (supra) while giving the judgment therein. Since the factual conditions considered in the decision of Pfizer Ltd. vs. ITO (supra) are similar to assessee's case and are different from the facts in the said case of Agreenco Fibre Foam (P) Ltd., vs. ITO (TDS), Kannur (supra), we are not convinced with the arguments of the learned D.R. Since the Ld. CIT(A) order is in tune with the Coordinate Bench decisions on the issue on the given facts, we affirm the same and dismiss the ground of Revenue."
10.1 As the issue in the present case is materially identical to that of the said case, following the decision of the coordinate bench, we uphold the order of the CIT(A) in directing the AO to delete the demand raised u/s 201(1) and 201(1A), which is in line with the decision of the coordinate bench and dismiss the ground raised by the revenue.
10.2 However, the revenue raised the ground that "the CIT(A) erred in relying on the case of Pfizer India Ltd that u/s 40(a)(ia) of the IT Act, 1961 that once the disallowance is made, the same cannot be subject to the provisions of section 201(1). Both the sections are 6 ITA No. 312/H/13 M / s N T T D a t a I n d ia E n t e r p r is e s A p p l ic a t i o n S e r v ic e s P v t . L t d .
independent and not inter chargeable." We are also in agreement with the statement that section 40(a)(ia) and section 201(1) are independent. The section 201(1) will get attracted only when the assessee is liable to deduct tax and failed to deduct tax. The provision of section 201(1)(a), is extracted below:
201 (1) where any person, including the principal officer of a company, -
(a) Who is required to deduct any sum in accordance with the provisions of this Act;
As per the said provision, TDS is required to be deducted in accordance with the Act. The important thing is, the provision of income-tax has to be attracted on the assessee in the first place, then, the liability to deduct will follow. When the assessee has not identified the person to whom credit has to be given and assessee itself has not claimed the above expenses as a deduction, the provision of income-tax Act is not attracted. Hence, there is no liability on the part of the assessee to deduct. When the liability itself is not on the assessee to deduct tax, the provision of section 201(1) will not be attracted. In the given case, the assessee has debited the provision in the P&L A/c on adhoc basis and disallowed in the computation statement, it means the assessee has not claimed any expenditure. When the expenditure itself is not claimed, the provision of the Act will not get attracted. Accordingly, the provisions of section 201(1) are not attracted in the assessee's case.
11. In the result, appeal of the revenue is dismissed.
Pronounced in the open court on 23 rd August, 2017.
Sd/- Sd/-
(P. MADHAVI DEVI) (S. RIFAUR RAHMAN)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Hyderabad, Dated: 23 rd August, 2017.
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ITA No. 312/H/13
M / s N T T D a t a I n d ia E n t e r p r is e s A p p l ic a t i o n S e r v ic e s P v t . L t d .
Kv Copy to:-
1) DCIT, Circle - 14(2), (TDS), Range - 14, Hyd.
2) M/s NTT Data India Enterprises Services Pvt. Ltd.,5-9-22, Mana Sarovar Complex, Secretariat Road, Hyderabad.
3) CIT(A) - II , Hyderabad
4) CIT (TDS), Hyderabad.
5) The Departmental Representative, I.T.A.T., Hyderabad.
6) Guard File