Toyota Kirloskar Motor P Ltd, Ramanagar V. Income tax Officer(TDS), Bangalore

ITA 1185/BANG/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7415 (ITAT-BANGALORE)
• Duration Of Justice: 3 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 15-03-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 15-09-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: G R REDDY CIT DRI
• Assessee Lawyers: PADAMCHAND KHINCHA
• Keywords: Recovery proceedings; Non-deduction of tax
• Section: 194C; 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORESHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER ITA NO. 1 185/BANG/2014 ASSESSMENT YEAR : 2012 - 13 M/S. TOYOTA KIRLOSKAR MOTORS PVT. LTD., PLOT NO. 1, BIDADI INDUSTRIAL AREA, RAMANAGAR DISTRICT 562 109. VS. THE INCOME TAX OFFICER (TDS), LARGE TAXPAYER UNIT, BANGALORE. APPELLANT RESPONDENT ASSESSEE BY : SHRI PADAM CHAND KHINCHA, CA REVENUE BY : SHRI G.R. REDDY, CIT (DR - I) DATE OF HEARING : 11 . 09 .201 7 DATE OF PRONOUNCEMENT : 31 .10 .2017 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE ASSESSEE WHICH IS DIREC TED AGAINST THE ORDER OF CIT(A), LTU, BANGALORE DATED 20.06.2014 FOR ASSESSM ENT YEAR 2012-13. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER. 1.1 THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), LTU, BANGALORE TO THE EXTENT PREJUDICIAL TO THE APPELLANT IS BAD IN LAW AND LIABLE TO BE QUASHED. 2.1 THE LEARNED CIT(A) LTU BANGALORE HAS ERRED IN C ONFIRMING THE ACTION OF THE LEARNED INCOME TAX OFFICER (TDS), LTU , BANGALORE IN TREATING THE APPELLANT AS 'ASSESSEE IN DEFAULT' UND ER SECTION 201(1) WITHOUT DEMONSTRATING THE SATISFACTION OF THE REQUI REMENTS OF EXPLANATION TO SECTION 191 OF THE ACT. 2.2 THE LEARNED CIT(A) LTU BANGALORE HAS ERRED IN C ONFIRMING THE ACTION OF THE LEARNED INCOME TAX OFFICER (TDS), LTU BANGALORE IN TREATING THE APPELLANT AS 'ASSESSEE IN DEFAULT' UND ER SECTION 201(1) WITHOUT ASCERTAINING WHETHER DEDUCTEES HAVE ALSO FA ILED TO PAY THE TAX DIRECTLY. ITA NO. 1185/BANG/2014 PAGE 2 OF 10 2.3 THE LEARNED CIT(A) LTU BANGALORE HAS ERRED IN N OT APPRECIATING THAT DEDUCTOR CANNOT BE REGARDED AS 'ASSESSEE IN DE FAULT' UNDER SECTION 201(1) WITHOUT DEMONSTRATING THAT THE DEDUC TEE HAS ALSO NOT PAID THE TAX DIRECTLY AS PER THE MANDATE OF EXPLANA TION TO SECTION 191 OF THE ACT. 2.4 THE LEARNED CIT(A) LTU BANGALORE HAS ERRED IN N OT APPRECIATING THAT SINCE THE DEDUCTEES WOULD HAVE FILED THE RETUR N OF INCOME / PAID THE TAXES, THE APPELLANT CANNOT BE DEEMED TO BE 'AS SESSEE IN DEFAULT' UNDER SECTION 201 OF THE ACT. 2.5 ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND LAW APPLICABLE, THE ORDER PASSED BY THE CIT(A) LTU AND THE ORDER PA SSED 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 C AN BE REGARDED AS 'ASSESSEE IN DEFAULT' UNDER SECTION 201, THE LEARNE D INCOME TAX OFFICER TDS, LTU, BANGALORE HAS ERRED IN RAISING THE DEMAND ON THE APPELLANT TO RECOVER THE TAX ALLEGED TO HAVE NOT DE DUCTED. 3.2 THE LEARNED CIT(A) LTU AND THE LEARNED INCOME T AX OFFICER (TDS), LTU BANGALORE HAS ERRED IN NOT APPRECIATING THAT (I) SECTION 201 DOES NOT IN ANY MANNER AUTHORIZE TO RECOVER THE AMOUNT OF TAX NOT DEDUCTED; (II) THE RECIPIENT OF INCOME IS LIABLE TO PAY THE T AX DIRECTLY AS PER THE MANDATE OF SECTION 191 AND CONSEQUENTLY, NO TAX CAN BE RECOVERED FROM THE DEDUCTOR. 3.3 ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND LAW APPLICABLE, NO TAX CAN BE RECOVERED FROM THE APPELLANT (DEDUCTO R) AND CONSEQUENTLY, THE DEMAND RAISED ON THE APPELLANT IS TO BE HELD AS BAD IN LAW. WITHOUT PREJUDICE AND ON MERITS, 4.1 THE LEARNED CIT(A) LTU, BANGALORE HAS ERRED M C ONFIRMING THE ACTION OF INCOME-TAX OFFICER, LTU (TDS), BANGALORE IN CONCLUDING THAT REVERSAL OF PROVISIONS AND UNUTILIZED AMOUNT O F PROVISION TOTALLY AMOUNTING TO RS. 8,71,32,988/- IS LIABLE FOR DEDUCT ION OF TAX AT SOURCE. 4.2 THE LEARNED CIT(A) LTU AND THE INCOME TAX OFFIC ER, LTU (TDS) BANGALORE HAS ERRED IN (A) TREATING REVERSAL OF PROVISION FOR EXPENDITURE AS LIABLE TO DEDUCTION OF TAX AT SOURCE. (B) NOT APPRECIATING THAT THE REVERSAL OF PROVISION FOR EXPENDITURE WERE AFTER CONSIDERING THE FACT THAT TH OSE PROVISIONS WERE NO LONGER REQUIRED IN THE BOOKS OF ACCOUNTS. ITA NO. 1185/BANG/2014 PAGE 3 OF 10 (C) NOT APPRECIATING THAT REVERSAL/ UNUTILIZED PROV ISION FOR EXPENDITURE IS NOT LIABLE FOR DEDUCTION OF TAX AT S OURCE. 4.3 ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND LAW APPLICABLE, REVERSAL OF PROVISIONS AND UNUTILIZED AMOUNT OF PRO VISION TOTALLY AMOUNTING TO RS. 8,71,32,988/- IS NOT LIABLE FOR DE DUCTION OF TAX AT SOURCE. 5.1 THE LEARNED CIT(A) LTU HAS ERRED IN CONFIRMING THE LEVY OF INTEREST UNDER SECTION 201(1A) OF THE ACT AND INTER EST ON DELAY IN REMITTANCE OF TDS. ON FACTS AND IN THE CIRCUMSTANC ES OF THE CASE AND LAW APPLICABLE, INTEREST UNDER SECTION 201(1A) AND INTEREST ON DELAY IN REMITTANCE IS NOT LEVIABLE. THE APPELLANT DENIES IT S LIABILITY TO PAY INTEREST UNDER SECTION 201(1A) AND INTEREST ON DELA Y IN REMITTANCE. 6.1 IN VIEW OF THE ABOVE AND OTHER GROUNDS TO BE AD DUCED AT THE TIME OF HEARING, THE APPELLANT PRAYS THAT THE ORDER PASS ED BY THE LEARNED CIT(A) LTU TO THE EXTENT PREJUDICIAL TO THE APPELLA NT BE QUASHED OR IN THE ALTERNATIVE A) APPELLANT BE HELD AS NOT AN ASSESSEE IN DEFAULT; B) REVERSAL OF PROVISIONS AND UNUTILIZED AMOUNT OF PROVISION TOTALLY AMOUNTING TO RS. 8,71,32,988/- BE HELD AS N OT LIABLE FOR TDS; C) INTEREST LEVIED UNDER SECTION 201(1A) BE DELETED ; D) INTEREST LEVIED FOR DELAYED REMITTANCE BE DELETE D; E) DEMAND OF RS. 76,10,879/- BE CANCELLED. THE APPELLANT PRAYS ACCORDINGLY. 3. IT WAS SUBMITTED BY LD. AR OF ASSESSEE THAT ALTH OUGH SO MANY GROUNDS ARE RAISED BUT ISSUE INVOLVED IS ONLY ONE AS TO WHE THER THE ASSESSEE CAN BE CONSIDERED AS AN ASSESSEE IN DEFAULT FOR NOT DEDUCT ING 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 OR DER. HE PLACED RELIANCE ON JUDGMENT OF HON'BLE KARNATAKA HIGH COURT RENDERED I N 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 T HE 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 20 05-06 AND 2006-07 AND A CORRESPONDING REVERSAL ENTRIES WERE MADE IN THE BOO KS OF ACCOUNT DURING THE ITA NO. 1185/BANG/2014 PAGE 4 OF 10 FINANCIAL YEAR 2007-08 AND UNDER THESE FACTS, IT WA S HELD THAT THERE WOULD BE NO LIABILITY TO DEDUCT TAX U/S. 194A AS NO INCOME HAS ACCRUED TO THE SUPPLIERS. HE FURTHER PLACED RELIANCE ON A TRIBUNAL ORDER RENDERE D IN THE CASE OF M/S. BOSCH LIMITED VS. ITO IN ITA NO. 1583/BANG/2014 DATED 01. 03.2016 COPY AVAILABLE ON PAGES 164 TO 181 OF PAPER BOOK. REGARDING THE F ACTS OF THIS CASE, HE DRAWN OUR ATTENTION TO PARA NO. 9 OF THE ORDER WHERE IT I S NOTED THAT THE PROVISIONS WERE MADE AT THE END OF THE YEAR AND THE SAME WERE REVER SED IN THE BEGINNING OF THE NEXT ACCOUNTING YEAR. AT THIS JUNCTURE, A QUER Y WAS RAISED BY THE BENCH AS TO WHAT IS THE DATE OF REVERSAL OF THE PROVISION IN THE PRESENT CASE. IN REPLY, THE LD. AR OF ASSESSEE SUBMITTED THAT THESE DETAILS ARE NOT READILY AVAILABLE BUT HE WILL OBTAIN THOSE DETAILS FROM ASSESSEE AND FURNISH THE SAME. LATER, THE LD. AR OF ASSESSEE HAS SUBMITTED THOSE DETAILS ALONG WITH LETTER DATED 04.10.2017 AS PER WHICH THE FIRST REVERSAL WAS MADE ON 30.09.2012 OF RS. 1,37,50,381/- AND THE LAST REVERSAL WAS MADE ON 31.01.2014 OF RS. 46, 46,440/- UNDER SECTION 194J AND RS. 64,55,074/- U/S. 194C. HE HAS ALSO PL ACED RELIANCE ON ANOTHER TRIBUNAL ORDER RENDERED IN THE CASE OF M/S. TE CONN ECTIVITY INDIA PVT. LTD. VS. ITO IN ITA NO. 3/BANG/2015 DATED 25.05.2016 COPY AV AILABLE ON PAGES 257 TO 269 OF PAPER BOOK AND POINTED OUT THAT IN THIS CASE , THE TRIBUNAL HAS FOLLOWED THE EARLIER TRIBUNAL ORDER CITED BY HIM HAVING BEEN RENDERED IN THE CASE OF M/S. BOSCH LIMITED VS. ITO(SUPRA). HE ALSO POINTED OUT THAT AS PER PARA NO. 6 OF THIS TRIBUNAL ORDER, THE FACTS ARE SIMILAR BECAUSE IN THIS CASE ALSO, THE PROVISIONS WERE MADE AT THE END OF THE ACCOUNTING YEAR AND WER E REVERSED IN THE BEGINNING OF THE NEXT YEAR. HE ALSO PLACED RELIANC E ON A JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF CIT VS. ELI LILL Y AND CO. (INDIA) P. LTD. AS REPORTED IN 312 ITR 0225. 3. AS AGAINST THIS, THE LD. DR OF REVENUE SUPPORTED THE ORDER OF AUTHORITIES BELOW. HE ALSO PLACED RELIANCE ON A TRIBUNAL ORDER RENDERE D IN THE CASE OF IBM INDIA (P.) LTD. VS. ITO AS REPORTED IN 59 TAXMANN.COM 107 (BANGALORE). HE SUBMITTED A COPY OF THIS TRIBUNAL ORDER. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FI ND THAT AS PER THE ORDER PASSED BY THE AO U/S. 201(1) AND 201(1A) OF IT ACT, 1961 ON 11.03.2014, HE ITA NO. 1185/BANG/2014 PAGE 5 OF 10 HAS WORKED OUT THE VARIOUS PAYMENTS ON WHICH THE TD S WAS NOT DEDUCTED BY ASSESSEE. THE DETAILS OF SUCH EXPENSES AND TDS AMO UNT IS AS UNDER. S.NO. PARTICULARS OF HEAD UNDER WHICH TAX IS DEDUCTED AT SOURCE REVERSED / UNUTILIZED TAX DEDUCTIBLE 1 PAYMENT TO OVERSEAS EXPENSES 195 14944451 2988890 2 PAYMENT TO CONTRACTORS 194C 50513830 1010277 3 PAYMENT TOWARDS PROFESSIONAL OR TECHNICAL SERVICES 194J 21608265 2160826 4 PAYMENT TOWARDS COMMISSION 194H 34094 3409 5 PAYMENT TOWARDS RENT 32348 3235 TOTAL 87132988 6166637 5. THE AO ALSO ADDED INTEREST U/S. 201(1A) OF RS. 1 4,18,327/- ALONG WITH INTEREST ON DELAYED REMITTANCE OF RS. 25,915/- AND RAISED DE MAND 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 CI T(A) IS AS PER PARA NOS. 6 TO 8 OF HIS ORDER WHICH ARE REPRODUCED HEREIN BELOW FO R THE SAKE OF READY REFERENCE. 6. COMING TO THE PROVISIONS OF THE IT ACT, IT IS CL EAR THAT ORDINARILY TAX IS TO BE DEDUCTED FROM THE AMOUNT PAID OR CREDI TED TO THE PARTY'S ACCOUNT. HOWEVER, SUBSECTION (2) TO SEC.194C, EXPLA NATION (II) TO SEC.194-I,EXPLANATION (C) TO SECTION 194J AND EXPLA NATION (1) TO SECTION 195 PROVIDE THAT EVEN IF THE SUMS REFERRED TO UNDER THESE PROVISIONS ARE CREDITED TO ANY ACCOUNT, WHETHER CAL LED 'SUSPENSE ACCOUNT' OR BY ANY OTHER NAME, IN THE BOOKS OF ACCO UNT 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, TH AT EVEN THE AMOUNTS CREDITED TO THE 'PROVISION' ACCOUNT INSTEAD OF PART Y ACCOUNT BY THE APPELLANT ARE CLEARLY WITHIN THE LIABILITY FOR TAX DEDUCTION UNDER THE IT ACT. 6.1 WITH REGARD TO THE APPELLANT'S CLAIM THAT THE I DENTITY OF THE RECIPIENTS WAS NOT KNOWN AND, HENCE, IT COULD NOT H AVE DEDUCTED TAX ON THE PROVISIONED AMOUNTS, I FIND THAT THE FACTS A ND PROBABILITY LARGELY BELIE THIS CLAIM. IT IS COMMONSENSICAL TO E XPECT THAT THE APPELLANT'S CREATION OF THE PROVISION FOR THE SERVI CES RECEIVED IN ORDER TO OBTAIN A CORRECT VIEW OF ITS PROFIT AT YEAR END WAS NOT BASED ON ANY ARBITRARY OR WHIMSICAL ESTIMATE. IT IS CLEAR FROM THE PROVISIONED ITA NO. 1185/BANG/2014 PAGE 6 OF 10 EXPENSES THAT THE ESTIMATE HAS FOLLOWED FROM PRE-EX ISTING CONTRACTS WITH KNOWN PARTIES FOR IDENTIFIED SERVICES AND, HEN CE, THE ACCOUNTING OF AMOUNTS LIABLE TO BE PAID TO THESE PARTIES FOR S ERVICES AVAILED AS PER KNOWN TERMS OF TRANSACTION IS A SPECIFIC EXERCI SE WHICH CARRIES WITH IT THE STATUTORY RESPONSIBILITY FOR DEDUCTING TAX AT SOURCE ALSO. THE APPELLANT CANNOT WRIGGLE OUT OF THIS RESPONSIBI LITY BY HOLDING THAT THE PROVISIONS WERE MADE WITHOUT ANY BASIS TOWARDS UNIDENTIFIED PARTIES FOR UNASCERTAINED TRANSACTIONS. 6.2 THE APPELLANT HAS IN ITS SUBMISSION EXTRACTED I N PARA 3 SUPRA IDENTIFIED 4 REASONS FOR WHICH THE PROVISIONS WERE MADE ON AN ESTIMATED BASIS WITHOUT TDS DEDUCTION, THE APPELLAN T WAS REQUIRED TO GIVE THE BREAK-UP OF THE IMPUGNED AMOUNT UNDER THES E 4 CATEGORIES, WHICH IS THE FACTUAL EVIDENCE REQUIRED TO APPRECIAT E THE APPELLANT'S CLAIM. THE APPELLANT, HOWEVER, HAS NOT BEEN ABLE TO SUBMIT THESE DETAILS. IT COULD ONLY FURNISH THE PARTY WISE DETAI LS OF TDS SUBSEQUENTLY DONE ON RECEIPT OF INVOICES. WITHOUT E VIDENTIARY SUPPORT THE APPELLANT'S CLAIM CANNOT BE ADMITTED. 7. IN GROUND NO. 4 THE APPELLANT HAS ARGUED THAT TH E AO ERRED IN TREATING REVERSAL OF PROVISION FOR EXPENDITURE AND UNUTILIZED AMOUNT OF PROVISION AS LIABLE TO DEDUCTION OF TAX AT SOURC E. I AM UNABLE TO AGREE WITH THIS CLAIM SINCE THE AO HAS NOT DISCUSSE D LIABILITY FOR TAX DEDUCTION ON THE 'REVERSAL OF PROVISION' BUT ON THE 'CREATION OF PROVISION' ITSELF BEFORE THE END OF FY 2011-12. THI S, AS HAS BEEN HELD IN THE PARAS ABOVE, WAS A POINT AT WHICH THE IT ACT , THE TAX AUDITOR AS WELL AS THE APPELLANT ITSELF HAD CLEARLY AGREED WIT H THE LIABILITY FOR TAX DEDUCTION. THIS GROUND, THEREFORE, FAILS. 8. FROM THE DETAILS AVAILABLE BEFORE ME I FIND THAT IN THE MONTHS IMMEDIATELY FOLLOWING THE CLOSE OF FY 2011-12 THE A PPELLANT 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 AM OUNT AND THIS IS INCONSISTENT WITH LAW AND FAIRNESS. HOWEVER, WHERE THE PROVISIONED AMOUNT WAS HIGHER THAN THE INVOICE AMOUNT, THE BALA NCE 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 MAK ING THE PROVISION, THE DEFAULT FOR NON-DEDUCTION OF TAX AT SOURCE IS T O 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 WI LL CONSIDER THEM AND LIMIT THE DEFAULT CALCULATION ACCORDINGLY. 6. IN THE LIGHT OF THESE FACTS, WE EXAMINE THE APPL ICABILITY OF VARIOUS JUDGMENTS ON WHICH RELIANCE HAS BEEN PLACED BY LD. AR OF ASSESSE E. THE FIRST JUDGMENT CITED BY HIM IS A JUDGMENT OF HON'BLE KARNATAKA HIGH COUR T RENDERED IN THE CASE OF KARNATAKA POWER TRANSMISSION CORPORATION LIMITED VS . DCIT (SUPRA). AS PER ITA NO. 1185/BANG/2014 PAGE 7 OF 10 THE FACTS NOTED IN PARA NO. 2 OF THIS JUDGEMENT, IT COMES OUT THAT DURING ASSESSMENT YEARS 2005-06, 2006-07 AND 2007-08 IN QU ESTION, THE ASSESSEE HAS CREATED PROVISIONS OF RS. 1765.75 LAKHS, RS. 12 40.70 LAKHS AND RS. 574.39 LAKHS RESPECTIVELY FOR CONTINGENT PAYMENT OF INTERE ST ON BELATED PAYMENTS TO ITS SUPPLIERS AND FOR THE FIRST TWO YEARS, THE ASSESSEE IN ITS P & L ACCOUNT TREATED THE SAID AMOUNT OF PROVISION AS EXPENDITURE TO ARRI VE AT PROFIT BUT IN THE RETURN OF INCOME FILED FOR ASSESSMENT YEARS 2005-06 AND 2006- 07, THE ASSESSEE DID NOT TREAT THE SAID AMOUNT OF PROVISION TOWARDS CONTINGE NT INTEREST PAYABLE AS EXPENDITURE AND IT ARRIVED AT THE TAXABLE INCOME WI THOUT EXCLUDING SUCH AMOUNTS OF PROVISION TOWARDS SUCH INTEREST AND CORR ESPONDING REVERSAL ENTRIES WERE MADE IN THE BOOKS OF ACCOUNTS DURING THE FINAN CIAL YEAR 2007-08. HENCE IT IS SEEN THAT IN THIS CASE, PROVISION WAS MADE IN RESPECT OF CONTINGENT LIABILITY FOR WHICH NO DEDUCTION WAS CLAIMED FOR COMPUTATION OF INCOME ALTHOUGH IT WAS DEBITED TO P & L ACCOUNT IN THE FIRST TWO YEARS. I N THE PRESENT CASE, THE PROVISION IS NOT FOR A CONTINGENT LIABILITY ALTHOUG H DISALLOWANCE WAS MADE BY THE ASSESSEE IN RESPECT OF SUCH AMOUNT OF EXPENSES FROM WHICH NO TAX WAS DEDUCTED IN VIEW OF THE PROVISIONS OF SECTION 40(A) (IA) OF THE ACT. IN THE PRESENT CASE, THIS IS NOT CASE OF THE ASSESSEE THAT THE PRO VISION WAS IN RESPECT OF A CONTINGENT LIABILITY. THEREFORE IN OUR CONSIDERED O PINION, THIS JUDGMENT OF HON'BLE KARNATAKA HIGH COURT IS NOT APPLICABLE IN T HE FACTS OF THE PRESENT CASE. 7. THE SECOND JUDGMENT CITED BY LD. AR OF ASSESSEE IS TRIBUNAL ORDER RENDERED IN THE CASE OF M/S. BOSCH LIMITED VS. ITO (SUPRA). AS PER THE FACTS NOTED IN PARA NO. 9 OF THIS TRIBUNAL ORDER, THE PROVISIONS WERE M ADE AT THE END OF THE YEAR AND THE SAME WERE REVERSED IN THE BEGINNING OF THE NEXT ACCOUNTING YEAR. WHEREAS IN THE PRESENT CASE, AS PER THE DETAILS OF REVERSAL OF PROVISION PROVIDED BY LD. AR OF ASSESSEE ON 04.10.2017, THE FIRST REVERSAL OF RS. 1,37,50,381 /- IN RESPECT OF OVERSEAS EXPENSES WAS MADE ON 30.09.2012 AND LAST REVERSAL WAS MADE ON 31.01.2014 IN RESPECT OF RS. 46,46,440/- BE ING PAYMENTS TO PROFESSIONAL OR TECHNICAL SERVICES AND RS. 64,55,07 4/- IN RESPECT OF PAYMENT TO CONTRACTORS. HENCE THIS IS UNDISPUTED FACTUAL POSI TION THAT REVERSAL IN THE PRESENT CASE IS NOT IN THE BEGINNING OF THE NEXT AC COUNTING YEAR. PART REVERSAL IS EVEN AFTER THE END OF THE NEXT ACCOUNTING YEAR. THE MAJOR REVERSAL OF RS. ITA NO. 1185/BANG/2014 PAGE 8 OF 10 2,93,03,081/- ON ACCOUNT OF PAYMENT TO CONTRACTORS AND RS. 1,30,82,760/- ON ACCOUNT OF PAYMENT TOWARDS PROFESSIONAL OR TECHNICA L 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 H AS 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 LIMI TED VS. ITO (SUPRA), THE BASIS OF THIS DECISION IS THIS THAT LIABILITY FOR D EDUCTION OF TAX AT SOURCE ARISES ONLY WHEN THERE IS ACCRUAL OF INCOME IN THE HANDS O F 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 N EXT 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 REVERSAL OF THE ENTRY. IF THE REVERSAL IS AFTER IN COME HAS ACCRUED TO THE PAYEE, SUCH REVERSAL IS NOT RELEVANT TO DECIDE THE LIABILI TY OF THE ASSESSEE FOR DEDUCTING TDS. IN THE FACTS OF THE PRESENT CASE, THIS TRIBUN AL ORDER IS NOT APPLICABLE. 8. THE SECOND TRIBUNAL ORDER CITED BY LD. AR OF ASS ESSEE IS THE TRIBUNAL ORDER RENDERED IN THE CASE OF M/S. TE CONNECTIVITY INDIA PVT. LTD. VS. ITO (SUPRA) AND WE HAVE ALREADY NOTED THAT THE FACTS IN THIS CASE A RE SIMILAR TO THE FACTS IN THE CASE OF M/S. BOSCH LIMITED VS. ITO (SUPRA) BECAUSE THIS CASE ALSO, IT IS NOTED BY THE TRIBUNAL THAT THE PROVISIONS WERE MADE AT TH E END OF THE ACCOUNTING YEAR AND WERE REVERSED AT THE BEGINNING OF THE NEXT YEAR . THE TRIBUNAL FOLLOWED THE EARLIER TRIBUNAL ORDER RENDERED IN THE CASE OF M/S. BOSCH LIMITED VS. ITO (SUPRA). WE HAVE ALREADY SEEN THAT IN THE FACTS OF THE PRESENT CASE, THIS TRIBUNAL ORDER RENDERED IN THE CASE OF M/S. BOSCH L IMITED VS. ITO(SUPRA) IS NOT APPLICABLE AND THEREFORE, FOR THE SAME REASON, THIS TRIBUNAL ORDER RENDERED IN THE CASE OF M/S. TE CONNECTIVITY INDIA PVT. LTD. VS . ITO (SUPRA) IS ALSO NOT APPLICABLE IN THE PRESENT CASE. ITA NO. 1185/BANG/2014 PAGE 9 OF 10 9. LASTLY THE ASSESSEE HAS PLACED RELIANCE ON A JUD GMENT OF HON'BLE APEX COURT RENDERED IN THE CASE OF CIT VS. ELI LILLY AND CO. ( INDIA) P. LTD. (SUPRA). IN THIS CASE, IT IS NOTED BY HONBLE APEX COURT THAT THE IS SUE IN DISPUTE WAS THIS AS TO WHETHER TDS PROVISIONS WHICH ARE IN THE NATURE OF M ACHINERY PROVISIONS TO ENABLE COLLECTION AND RECOVERY OF TAXES ARE INDEPEN DENT OF THE CHARGING PROVISIONS WHICH DETERMINES THE ASSESSABILITY OF IN COME CHARGEABLE UNDER THE HEAD 'SALARIES' IN THE HANDS OF THE RECIPIENT? AS P ER PARA NO. 37 OF THIS JUDGMENT, IT WAS HELD BY HONBLE APEX COURT THAT TH E TDS PROVISIONS WHICH ARE IN THE NATURE OF MACHINERY PROVISIONS TO ENABLE COL LECTION AND RECOVERY OF TAX FORMS AN INTEGRATED CODE WITH THE CHARGING AND COMP UTATION PROVISIONS UNDER THE 1961 ACT, WHICH DETERMINES THE ASSESSABILITY/TA XABILITY OF 'SALARIES' IN THE HANDS OF THE EMPLOYEE OF THE ASSESSEE AND THEREFORE SECTION 192(1) HAS TO BE READ WITH SECTION 9(1)( II ) READ WITH THE EXPLANATION THERETO AND IT WAS HELD THAT IF ANY PAYMENT OF INCOME CHARGEABLE UNDER THE HEAD 'SA LARIES' FALLS WITHIN SECTION 9(1)( II ) THEN TDS PROVISIONS WOULD STAND ATTRACTED. IT WA S FURTHER HELD THAT IDENTIFICATION OF THE RECIPIENT OF THE SALARY WAS NOT IN DISPUTE IN THAT CASE AND THEREFORE, THE TAX-DEDUCTOR-ASSESSEE WERE DUTY BOUND TO DEDUCT TAX AT SOURCE U/S. 192(1) FROM THE HOME SALARY/SPECIAL ALL OWANCE(S) PAID ABROAD BY THE FOREIGN COMPANY, PARTICULARLY WHEN NO WORK STOO D PERFORMED FOR THE FOREIGN COMPANY AND THE TOTAL REMUNERATION STOOD PAID ONLY ON ACCOUNT OF SERVICES RENDERED IN INDIA DURING THE PERIOD IN QUESTION.HOW EVER THE PENALTY PROCEEDINGS U/S. 271C WERE QUASHED. 10. IN THE PRESENT CASE, THERE IS NO DISPUTE REGARD ING PENALTY PROCEEDINGS U/S. 271C AND REGARDING THE LIABILITY U/S. 201 AND 201(1 A) OF IT ACT, THIS JUDGMENT OF HONBLE APEX COURT DOES NOT HELP THE ASSESSEE. 11. NOW WE EXAMINE THE APPLICABILITY OF TRIBUNAL OR DER 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 D EDUCT TAX ON PROVISION FOR EXPENSES CREATED IN BOOKS OF ACCOUNTS. THE TRIBUNA L 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 THA T THERE WAS NO LIABILITY UNDER CHAPTER XVII-B. THIS TRIBUNAL ORDER SUPPORTS THE CASE OF THE ASSESSEE ITA NO. 1185/BANG/2014 PAGE 10 OF 10 BECAUSE IN THE PRESENT CASE ALSO, THE ASSESSEE HAS MADE DISALLOWANCE U/S 40A (IA) AND IT MEANS THAT THE ASSESSEE HAS ADMITTE D ITS DEFAULT U/S. 40(A)(IA) AND THEREFORE, IN THE PROCEEDINGS U/S. 201 AND 201 (1A), THE ASSESSEE CANNOT ARGUE THAT THERE WAS NO LIABILITY UNDER CHAPTER XVI I-B. SINCE NONE OF THE JUDGMENTS CITED BY LD. AR OF ASSESSEE IS RENDERING ANY HELP TO THE ASSESSEE IN THE PRESENT CASE AND THE TRIBUNAL ORDER CITED BY LD . DR OF REVENUE IS HELPING THE CASE OF REVENUE, WE FIND NO REASON TO INTERFERE IN THE ORDER OF CIT(A). 12. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- SD/- (SUNIL KUMAR YADAV) (ARUN KUMAR GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 31 ST OCTOBER, 2017. /MS/ COPY TO: 1. APP ELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.