M/s. Timken Engineering and Research India Private Limited, Bengaluru V. Deputy Commissioner of Income Tax, Circle-12(4), Bengaluru

ITA 161/BANG/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 0438 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 29-01-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PRIYADARSHI MISHRA
• Keywords: Capital asset; Depreciation; Retrospective amendment; Non-deduction of tax; Revenue expenditure; Capital expenditure; TDS; Set aside
• Section: 40(a)(ia); 37(1); 43; 48; 13

Judgement Text

ITA NOS.161 & 162/BANG/2019 TIMKEN ENGINEERING AND RESEARCH INDIA PVT. LTD., BANGALORE IN THE INCOME TAX APPELLATE TRIBUNAL BBENCH: BANGALORE BEFORE SHRI B. R. BASKARAN, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA NOS.161&162/BANG/2019 ASSESSMENTYEARS:2009-10 & 2010-11 M/S. TIMKEN ENGINEERING & RESEARCH INDIA PVT. LTD. #39-42, PHASE II, ELECTRONIC CITY BANGALORE-560100 PAN NO : AABCT2265L VS. DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE 12(4) BANGALORE APPELLANT RESPONDENT APPELLANT BY : SHRI ALIASGARRAMPURWALA, A.R. RESPONDENT BY : SHRI PRIYADARSHI MISHRA, D.R. DATE OF HEARING : 13.03.2020 DATE OF PRONOUNCEMENT : 29.04.2020 O R D E R PERB.R. BASKARAN, ACCOUNTANT MEMBER: BOTH THE APPEALS OF THE ASSESSEE ARE DIRECTED AGAI NST THE ORDERS PASSED BY LD CIT(A)-7, BENGALURU AND THE Y RELATE TO THE ASSESSMENT YEARS 2009-10 AND 2010-11. BOTH THE APP EALS WERE HEARD TOGETHER AND HENCE THEY ARE BEING DISPOSED OF BY THIS COMMON ORDER, FOR THE SAKE OF CONVENIENCE. 2. COMMON ISSUES URGED IN THESE APPEALS ARE:- ITA NOS.161 & 162/BANG/2019 TIMKEN ENGINEERING AND RESEARCH INDIA PVT. LTD., BANGALORE PAGE 2 OF 14 (A) DISALLOWANCE OF EXPENSES FOR NON-DEDUCTION OF T AX ON THE TAX PORTION OF SALARY PAID TO EXPATRIATE EMPLOYEES BORNE BY THE ASSESSEE. (B) DISALLOWANCE OF PAYMENT MADE FOR PURCHASE OF APPLICATION SOFTWARE U/S 40(A)(IA) OF THE ACT FOR N ON-DEDUCTION OF TAX AT SOURCE. (C) DISALLOWANCE OF CUSTOM DUTY CHARGES PAID ON D E-BONDING OF CAPITAL GOODS TREATING THE SAME AS CAPITAL EXPEN DITURE. (D) LEVY OF INTEREST U/S 234B, 234C AND 234D OF THE ACT. 3. FOLLOWING ADDITIONAL ISSUES ARE URGED IN THE APPEAL FILED FOR AY 2009-10 (I) DISALLOWANCE OF PAYMENTS MADE TOWARDS BROADBAN D CONNECTIVITY CHARGES ON ACCOUNT OF NON-DEDUCTION OF TAX AT SOURCE. (II) DISALLOWANCE OF PAYMENTS MADE TO TIMKEN USA O N ACCOUNT OF NON-DEDUCTION OF TAX AT SOURCE. (III) DISALLOWANCE OF INTEREST PAID ON BELATED PAY MENT OF STATUTORY DUES TREATING THE SAME AS PENAL IN NATURE . 4. FOLLOWING ADDITIONAL ISSUE IS URGED IN THE APP EAL FILED FOR AY 2010-11. (I) DISALLOWANCE OF YEAR END PROVISIONS TOWARDS COMMUNICATION EXPENSES, PROFESSIONAL EXPENSES ON AC COUNT OF NON-DEDUCTION OF TAX AT SOURCE. 5. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PR OVIDING ENGINEERING & RESEARCH SERVICES FOR BEARINGS AND RE LATED PRODUCTS AND GLOBAL TRANSACTIONAL SERVICES. ITA NOS.161 & 162/BANG/2019 TIMKEN ENGINEERING AND RESEARCH INDIA PVT. LTD., BANGALORE PAGE 3 OF 14 6. WE SHALL FIRST TAKE UP THE COMMON ISSUES URG ED IN BOTH THE YEARS UNDER CONSIDERATION. THE FIRST COMMON ISSUE IS ADDITION MADE ON ACCOUNT OF NON-DEDUCTION OF TAX AT SOURCE F ROM INCOME-TAX PAYABLE ON SALARY OF EXPATRIATE EMPLOYEES, WHICH WA S BORNE BY THE ASSESSEE. THE LD A.R SUBMITTED THAT THE ASSESSEE H AS ACTUALLY DEDUCTED TAX AT SOURCE FROM THE INCOME-TAX PAYABLE ON THE SALARY OF EXPATRIATE EMPLOYEES. HE FURTHER SUBMITTED THAT TH E EMPLOYEES HAVE ALSO CONSIDERED THE INCOME TAX BORNE BY THE AS SESSEE AS PERQUISITES. THE LD D.R, ON THE CONTRARY, SUBMITTE D THAT THE SUBMISSION OF THE ASSESSEE IS CONTRARY TO THE OBSER VATIONS MADE BY THE TAX AUTHORITIES AND ACCORDINGLY SUBMITTED THAT THE SAME NEEDS TO BE VERIFIED AT THE END OF THE ASSESSING OFFICER. 7. WE FIND MERIT IN THE SUBMISSIONS MADE BY LD D.R. ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY LD CI T(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE ASSES SING OFFICER FOR EXAMINING IT AFRESH BY DULY CONSIDERING THE EXPLANA TIONS AND EVIDENCES THAT MAY BE FURNISHED BY THE ASSESSEE. 8. THE NEXT COMMON ISSUE RELATES TO THE DISALLO WANCE OF SOFTWARE PURCHASES U/S 40(A)(IA) OF THE ACT. THE LD. A.R. SUBMITTED THAT THE ASSESSEE HAD CAPITALIZED THE SOFTWARE PURCHASES AND CLAIMED DEPRECIATION THEREON. THE A.O. TOOK THE VIEW THAT P AYMENT TOWARDS SOFTWARE PURCHASES ARE IN THE NATURE OF ROYALTY LIA BLE FOR DEDUCTION OF TAX AT SOURCE. THE FACTS RELATING TO AY 2009-10 ARE THAT THE ASSESSEE HAD PURCHASED SOFTWARE TO THE TUNE OF RS.8 2.87 LAKHS AND CAPITALIZED THE SAME. ACCORDINGLY, IT HAS CLAIMED DEPRECIATION THEREON. THE AO NOTICED THAT THE ASSESSEE HAD DEDU CTED TDS ON AN ITA NOS.161 & 162/BANG/2019 TIMKEN ENGINEERING AND RESEARCH INDIA PVT. LTD., BANGALORE PAGE 4 OF 14 AMOUNT OF RS.43.74 LAKHS. THE ASSESSEE HAD CLAIMED DEPRECIATION ON THE ABOVE SAID AMOUNT OF RS.43.74 LAKHS @ 60% WH ICH WORKED OUT TO RS.26.25 LAKHS. ACCORDINGLY, THE A.O. GAVE SET OFF OF DEPRECIATION CLAIMED ON THE SOFTWARE PURCHASES ON W HICHTDS HAD BEEN DEDUCTED AND ACCORDINGLY DISALLOWED A SUM OF R S.56.62 LAKHS (RS.82.87 RS.26.25). THE LD. CIT(A) ALSO CONFIRM ED THE SAME. 9. THE LD. A.R. SUBMITTED THAT THE ASSESSEE HAS NOT CLAIMED SOFTWARE PURCHASES AS EXPENDITURE IN THE PROFIT & L OSS ACCOUNT AND CAPITALIZED THE SAME. ACCORDINGLY THE ASSESSEE HAS CLAIMED DEPRECIATION THERE ON @ 60%. ACCORDINGLY, HE SUBMI TTED THAT THE TAX AUTHORITIES ARE NOT JUSTIFIED IN DISALLOWING AN AMOUNT WHICH IS NOT CLAIMED IN THE PROFIT & LOSS ACCOUNT. THE LD. A.R. FURTHER SUBMITTED THAT THE DEPRECIATION IS STATUTORY ALLOWA NCE AND HENCE THERE IS NO CASH OUTGO. ACCORDINGLY, HE SUBMITTED THAT THE DEPRECIATION CLAIM CANNOT BE DISALLOWED U/S 40(A)(I A) OF THE ACT. IN THIS REGARD, HE PLACED RELIANCE ON THE DECISION REN DERED BY HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. MARK AUTO INDUSTRIES LTD. (2013) 358 ITR 43 AND ALSO CERTAIN OTHER DECISIONS. 10. WE HEARD LD. D.R. ON THIS ISSUE AND PERUSED THE RECORD. SINCE THE ASSESSEE HAS CAPITALIZED THE SOFTWARE EXP ENDITURE AND CLAIMED DEPRECIATION THERE ON, THE AMOUNT DEBITED T O PROFIT & LOSS ACCOUNT IS ONLY THE ABOVE SAID DEPRECIATION. AS PE R THE DECISION RENDERED BY HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF MARK AUTO INDUSTRIES LTD. (SUPRA), PROVISIONS OF SE CTION 40(A)(IA) OF THE ACT IS NOT APPLICABLE TO AN ITEM WHICH IS NOT C LAIMED AS EXPENDITURE IN THE BOOKS OF ACCOUNTS. THE MUMBAI B ENCH OF ITAT IN THE CASE OF SAB MILLER INDIA LTD. (155 ITD 1093) HAS EXPRESSED ITA NOS.161 & 162/BANG/2019 TIMKEN ENGINEERING AND RESEARCH INDIA PVT. LTD., BANGALORE PAGE 5 OF 14 THE VIEW THAT THE PROVISIONS OF SECTION 40(A)(IA) O F THE ACT ARE NOT ATTRACTED TO DEPRECIATION, SINCE IT IS NOT AN OUTGO ING EXPENDITURE. ACCORDINGLY, WE FIND MERIT IN THE SUBMISSIONS OF TH E ASSESSEE. ACCORDINGLY, WE ARE OF THE VIEW THAT THE DISALLOWAN CE MADE BY THE A.O. IS NOT CORRECT IN LAW. ACCORDINGLY, WE SET AS IDE THE ORDER PASSED BY THE LD. CIT(A) ON THIS ISSUE IN BOTH THE YEARS AND DIRECT THE A.O. TO DELETE THE DISALLOWANCE MADE IN BOTH TH E YEARS ON ACCOUNT OF SOFTWARE PURCHASES. 11. THE NEXT ISSUE RELATES TO DISALLOWANCE OF CUSTO M DUTY CHARGES PAID ON DE-BONDING OF CAPITAL GOODS TREATING THE SA ME AS CAPITAL EXPENDITURE. THE LD. A.R. SUBMITTED THAT THE ASSES SEE HAD IMPORTED CERTAIN CAPITAL ASSETS FOR ITS EXPORT-ORIE NTED UNIT WITHOUT PAYING CUSTOM DUTY. WHEN IT REMOVED THE CAPITAL GO ODS FROM EXPORT-ORIENTED UNIT, IT PAID CUSTOM DUTY CHARGES A ND CLAIMED THE SAME AS REVENUE EXPENDITURE. THE A.O. TOOK THE VIE W THAT THE CUSTOM DUTY SO PAID IS CAPITAL IN NATURE AND ACCORD INGLY, DISALLOWED THE SAME. THE LD. CIT(A) ALSO CONFIRMED THE SAME. 12. BEFORE US, THE ASSESSEE PLACED RELIANCE ON THE DECISION RENDERED BY HONBLE ALLAHABAD HIGH COURT IN THE CAS E OF CIT VS. JINDAL POLYESTER LTD. (2017) 397 ITR 282 IN ORDER T O CONTEND THAT THE CUSTOM DUTY CHARGES SO PAID IS ALLOWABLE AS DED UCTION. 13. WE HEARD LD. D.R. AND PERUSED THE RECORD. IN T HE CASE OF JINDAL POLYESTER LTD. (SUPRA), THE HONBLE HIGH COU RT HAS NOTED THAT THE ITAT HAD ACCEPTED THE PLEA OF THE ASSESSEE REGARDING CUSTOM DUTY PAID ON DE-BONDING BY HOLDING THAT THE ASSESSEE IS ENTITLED TO DEDUCTION EITHER BY WAY OF DEPRECIATION OR BY WAY OF ITA NOS.161 & 162/BANG/2019 TIMKEN ENGINEERING AND RESEARCH INDIA PVT. LTD., BANGALORE PAGE 6 OF 14 DEDUCTION ON ENTIRE EXPENDITURE AS REVENUE EXPENDIT URE. THE HONBLE HIGH COURT ACCEPTED THE ALTERNATIVE PROPOSA L OF ALLOWING THE ABOVE SAID AMOUNT AS REVENUE EXPENDITURE. 14. IN THE INSTANT CASE, IT IS NOT CLEAR AS TO WHET HER THE VALUE OF GOODS ON WHICH THE CUSTOM DUTY WAS PAID WAS TREATED BY THE ASSESSEE AS CAPITAL EXPENDITURE OR AS REVENUE EXPEN DITURE. IN OUR VIEW, THE CUSTOM DUTY PAID SHOULD TAKE THE COLOUR O F GOODS FOR WHICH IT WAS PAID. IF THE ASSESSEE HAD CAPITALIZED THE VALUE OF GOODS, THEN THE CUSTOM DUTY PAID SHOULD ALSO BE CAP ITALIZED AND DEPRECIATION SHOULD BE ALLOWED THEREON. SINCE THIS FACT REQUIRES VERIFICATION, WE SET ASIDE THE ORDER PASSED BY THE LD. CIT(A) ON THIS ISSUE IN BOTH THE YEARS AND RESTORE THE SAME TO THE FILE OF THE A.O. FOR EXAMINING IT AFRESH BY CONSIDERING ALL RELEVANT DETAILS. 15. THE NEXT COMMON ISSUE RELATES TO CHARGING OF IN TEREST U/S 234B, 234C & 234D OF THE ACT. CHARGING OF INTEREST IS CONSEQUENTIAL IN NATURE AND HENCE THIS GROUND DOES NOT REQUIRE ADJUDICATION. 16. WE SHALL NOW TAKE UP THE ISSUES URGED BY THE AS SESSEE IN ASSESSMENT YEAR 2009-10. THE FIRST ISSUE RELATES T O DISALLOWANCE OF PAYMENTS MADE TOWARDS BROAD BAND CONNECTIVITY CHARG ES ON ACCOUNT OF NON-DEDUCTION OF TAX AT SOURCE. SINCE T HE ASSESSEE DID NOT DEDUCT TAX ON BROAD BAND CONNECTIVITY CHARGES, THE A.O. DISALLOWED THE SAME U/S 40(A)(IA) OF THE ACT. 17. WE HEARD THE PARTIES ON THIS ISSUE AND PERUSED THE RECORD. THE LD. A.R. PLACED HIS RELIANCE ON THE ORDER PASSE D BY ITAT IN HIS ITA NOS.161 & 162/BANG/2019 TIMKEN ENGINEERING AND RESEARCH INDIA PVT. LTD., BANGALORE PAGE 7 OF 14 OWN CASE FOR THE ASSESSMENT YEAR 2008-09 IN ITA NO.335/BANG/2013 DATED 10.5.2019. HOWEVER, WE NOTI CE THAT THE PROVISIONS OF SECTION 9(1)(VI) OF THE ACT HAS BEEN AMENDED BY FINANCE ACT, 2012 WITH RETROSPECTIVE EFFECT FROM 1. 6.1976 BY INSERTING EXPLANATION 4 TO EXPLANATION 6. THE PROV ISIONS OF SEC.9(1)(VI) DEAL WITH THE INCOME BY WAY OF ROYA LTY. AS PER EXPLANATION 6, THE EXPRESSION PROCESS USED IN SEC TION 9(1)(VI) OF THE ACT INCLUDES AND SHALL BE DEEMED TO HAVE ALWAYS INCLUDED TRANSMISSION BY SATELLITE (INCLUDING UP LINKING, AM PLIFICATION, CONVERSION FOR DOWN LINKING OF ANY SIGNAL), CABLE, OPTIC FIBRE, OR BY ANY OTHER SIMILAR TECHNOLOGY, WHETHER OR NOT SUCH P ROCESS IS SECRET. WE NOTICE THAT THE DECISION IN AY 2008-09 WAS RENDE RED BY THE CO- ORDINATE BENCH WITHOUT CONSIDERING THE EXPLANATION 6 TO SEC.9(1)(VI) OF THE ACT. IN VIEW OF THE ABOVE SAID EXPLANATION 6, THE BROAD BAND CONNECTIVITY CHARGES SHALL BE COVERED BY THE DEFINI TION OF ROYALTY. 18. THE LD. D.R. SUBMITTED THAT THE HONBLE KARNATA KA HIGH COURT, IN THE CASE OF CIT VS. CGI INFORMATION SYSTE MS AND MANAGEMENT CONSULTANTS PVT. LTD. (2014) 48 TAXMANN. COM 264, HAS HELD THAT INTRA NET FACILITIES PROVIDED BY A NO N-RESIDENT COMPANY AND USED BY THE ASSESSEE BY MAKING PAYMENT WOULD AMOUNT TO ROYALTY. IN VIEW OF THE ABOVE SAID DECIS ION OF HONBLE KARNATAKA HIGH COURT AND ALSO EXPLANATION 6 INSERTE D TO SECTION 9(1)(VI) OF THE ACT, THE PAYMENT MADE TOWARDS BROAD BAND CONNECTIVITY WOULD FALL UNDER THE DEFINITION OF RO YALTY. SINCE THE ASSESSEE HAS NOT DEDUCTED TAX AT SOURCE, WE ARE OF THE VIEW THAT THE TAX AUTHORITIES ARE JUSTIFIED IN MAKING DISALLOWANC E OF THE SAME U/S 40(A)(IA) OF THE ACT. ITA NOS.161 & 162/BANG/2019 TIMKEN ENGINEERING AND RESEARCH INDIA PVT. LTD., BANGALORE PAGE 8 OF 14 19. THE NEXT ISSUE URGED IN ASSESSMENT YEAR 2009-10 RELATES TO DISALLOWANCE OF PAYMENTS MADE TO TIMKEN, USA ON ACC OUNT OF NON- DEDUCTION OF TAX AT SOURCE. AT THE TIME OF HEARING , THE LD. A.R. DID NOT PRESS THIS GROUND AND ACCORDINGLY, THE SAME IS DISMISSED AS NOT PRESSED. 20. THE NEXT ISSUE RELATES TO DISALLOWANCE OF INTER EST PAID ON BELATED PAYMENT OF STATUTORY DUES BY TREATING THEM AS PENALTY. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE H AS PAID INTEREST ON THE FOLLOWING STATUTORY PAYMENTS ON ACCOUNT OF B ELATED REMITTANCE. A) INTEREST ON SERVICE TAX RS.66,290/- B) DE-BONDING CHARGES RS.1,30,838/- C) INTEREST ON PENALTY TOWARDS LAND TRANSFER RS.91,5 31/- D) INTEREST ON TDS RS.5,989/- THE A.O. DISALLOWED THE ABOVE SAID AMOUNTS TREATING THEM AS PENAL IN NATURE. THE LD. CIT(A) ALSO CONFIRMED THE SAME. 21. AT THE TIME OF HEARING, THE ASSESSEE DID NOT PR ESS THE DISALLOWANCE OF INTEREST AND PENALTY TOWARDS LAND T RANSFER. ACCORDINGLY, THE ADDITION MADE BY THE A.O. ON THIS AMOUNT IS CONFIRMED. THE LD. A.R. SUBMITTED THAT THE ASSESS EE HAD SUO MOTO DISALLOWED THE INTEREST ON TDS OF RS.5,989/- AND HE NCE THE DISALLOWANCE MADE BY THE A.O. OF THIS AMOUNT WOULD RESULT IN DOUBLE DISALLOWANCE. WE RESTORE THIS ISSUE TO THE FILE OF THE A.O. FOR EXAMINING THE CLAIM OF THE ASSESSEE AND IF THE ASSE SSEE HAD ALREADY DISALLOWED THE AMOUNT, THEN THERE IS NO REQUIREMENT OF DISALLOWING THE SAME AGAIN. ITA NOS.161 & 162/BANG/2019 TIMKEN ENGINEERING AND RESEARCH INDIA PVT. LTD., BANGALORE PAGE 9 OF 14 22. THE INTEREST PAID ON DE-BONDING CHARGES NEEDS T O BE SET ASIDE TO THE FILE OF THE A.O, SINCE THE ISSUE RELATING TO PAYMENT OF DE- BONDING CHARGES HAS BEEN RESTORED TO THE FILE OF TH E A.O BY US IN THE EARLIER PARAGRAPHS. ACCORDINGLY, WE RESTORE THIS I SSUE TO THE FILE OF THE A.O. THE REMAINING AMOUNT RELATES TO INTEREST PAID ON BELATED PAYMENT OF SERVICE TAX. THE LD. A.R. PLACED RELIAN CE ON THE DECISION OF BANGALORE BENCH OF ITAT IN THE CASE OF VELANKANI INFORMATIONS SYSTEMS LTD. (2018) 173 ITD 19, WHEREI N THE COORDINATE BENCH HAS TAKEN THE VIEW THAT THE INTERE ST PAID ON DELATED DEPOSIT OF SERVICE TAX IS NOT PENAL IN NATU RE AND IS ELIGIBLE FOR DEDUCTION U/S 37(1) OF THE ACT. FOLLOWING THE ABOVE SAID DECISION, WE SET ASIDE THE ORDER PASSED BY THE LD. CIT(A) AND DIRECT THE A.O. TO ALLOW DEDUCTION OF INTEREST PAID ON SER VICE TAX. 23. WE SHALL NOW TAKE UP THE INDIVIDUAL ISSUES U RGED BY THE ASSESSEE IN AY 2010-11, VIZ., DISALLOWANCE OF YEAR END PROVISIONS ON ACCOUNT OF NON-DEDUCTION OF TAX AT SOURCE FROM THEM . THE FACTS RELATING THERETO ARE THAT THE AO NOTICED THAT THE A SSESSEE HAD MADE YEAR END PROVISION FOR FOLLOWING EXPENSES: COMMUNICATION EXPENSES RS.13,92,918/- LEGAL AND PROFESSIONAL FEE RS.18,22,983/- HOWEVER, THE ASSESSEE HAD NOT DEDUCTED TAX AT SOURC E FROM THE ABOVE SAID PAYMENTS. HENCE THE AO DISALLOWED THEM U/S 40(A)(IA) OF THE ACT. THE LD CIT(A) ALSO CONFIRMED THE SAME. 24. BEFORE US, THE LD A.R PLACED HIS RELIANCE ON THE DECISION RENDERED BY HON'BLE GUJARAT HIGH COURT IN THE CASE OF SANGHI INFRASTRUCTURE LTD (2018)(96 TAXMANN.COM 370) AND S UBMITTED THAT THE HONBLE GUJARAT HIGH COURT HAS HELD IN THE ABOV E SAID CASE THAT ITA NOS.161 & 162/BANG/2019 TIMKEN ENGINEERING AND RESEARCH INDIA PVT. LTD., BANGALORE PAGE 10 OF 14 THERE IS NO REQUIREMENT TO DEDUCT TAX AT SOURCE FRO M THE PROVISIONS MADE. 25. WE HAVE GONE THROUGH THE ABOVE SAID ORDER A ND WE NOTICE THAT THE HONBLE GUJARAT HIGH COURT EXPRESSED THE A BOVE SAID VIEW BY OBSERVING THAT THE PROVISION WAS A CONTINGENT LI ABILITY. IN THE INSTANT CASE, THE PROVISION SO MADE WAS ALLOWED BY THE AO U/S 37(1) AND HENCE IT WAS NOT A CONTINGENT LIABILITY. HENCE WE ARE OF THE VIEW THAT THE ASSESSEE CANNOT TAKE SUPPORT OF T HE ABOVE SAID DECISION. 26. AN IDENTICAL ISSUE WAS CONSIDERED BY THE CH ENNAI BENCH OF TRIBUNAL IN THE CASE OF DISHNET WIRELESS LTD (2015) (60 TAXMANN.COM 329) (123 DTR (TRIB.) 153) AND THE TRIB UNAL HAS HELD AS UNDER. THE ASSESSEE BEFORE THE CHENNAI BENCH WA S PROVIDING TELECOMMUNICATION SERVICES. IT MADE YEAREND PROVIS IONS FOR VARIOUS EXPENSES ON ESTIMATED BASIS. IT WAS CONTENDED BY T HE ASSESSEE THAT THE PAYEES DETAILS ARE NOT AVAILABLE IN RESPECT OF SOME OF THE PROVISIONS MADE AND HENCE THE PROVISIONS OF SEC.40( A)(IA) SHOULD NOT BE INVOKED FOR NON-DEDUCTION OF TAX AT SOURCE. THE CHENNAI BENCH OF TRIBUNAL HAS HELD AS UNDER:- 24. NOW COMING TO THE ISSUE OF YEAR-END PROVISIONS, TH E CONTENTION OF THE ASSESSEE IS THAT IT IS ENGAGED IN VARIOUS SERVICES LIKE ADDRESS VERIFICATIONS, CREDIT CERTIFICATION, C ONTENT DEVELOPMENT ETC. THE ASSESSEE CLAIMS THAT PROVISION S ARE MADE ON ESTIMATION BASIS SINCE IT IS NOT IDENTIFIABLE AS TO WHAT AMOUNT HAS TO BE PAID TO THE SERVICE PROVIDERS. IN CASE OF NEW SERVICE ITA NOS.161 & 162/BANG/2019 TIMKEN ENGINEERING AND RESEARCH INDIA PVT. LTD., BANGALORE PAGE 11 OF 14 CONNECTIONS, THE ASSESSEE HAS TO NECESSARILY VERIFY THE CUSTOMERS' ADDRESS AND IDENTIFICATION. THE CLAIM OF THE ASSESS EE IS THAT IN THE LAST MONTH OF THE FINANCIAL YEAR, IT IS NOT KNO WN HOW MANY CUSTOMER VERIFICATIONS HAVE BEEN COMPLETED AND THE EXACT AMOUNT REQUIRED TO BE PAID. HOWEVER, ON THE BASIS O F THE PAST EXPERIENCE, THE ASSESSEE IS MAKING AN OVERALL PROVI SION FOR INCURRING THIS EXPENDITURE. FROM THE ORDER OF THE C IT(APPEALS) IT APPEARS THAT APART FROM IDENTIFICATION AND ADDRESS VERIFICATION, THE ASSESSEE HAS ALSO MADE PROVISION TOWARDS ICU CH ARGES AND LEASE LINE EXPENSES, ETC. FROM THE ORDER OF THE CIT (APPEALS) IT APPEARS THAT THE ASSESSEE ALSO HAS TO PAY THE VARIO US OTHER SERVICE PROVIDERS FOR PROVIDING VALUE ADDED SERVICE TO ITS SUBSCRIBERS LIKE DAILY HOROSCOPES, ASTROLOGY, SONGS , WALLPAPER DOWNLOADS, CRICKET SCORES, ETC. ADMITTEDLY, THE ASS ESSEE MADE ARRANGEMENT WITH OTHER SERVICE PROVIDERS FOR PROVID ING THESE KIND OF VALUE ADDED SERVICES. THERE MAY BE JUSTIFIC ATION WITH REGARD TO THE EXPENDITURE FOR AVAILING THE SERVICES OF IDENTIFICATION AND VERIFICATION FOR THE LAST MONTH OF FINANCIAL YEAR, SINCE THE ASSESSEE MAY NOT HAVE THE EXACT DET AILS ON VERIFICATION DONE BY THE CONCERNED PERSONS AND THE AMOUNT REQUIRED TO BE PAID. HOWEVER, IN RESPECT OF THE DOW NLOADS AND VALUE ADDED SERVICE, ETC. THE ENTIRE DETAILS MAY BE AVAILABLE IN THE SYSTEM. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT WHEREVER THE PARTICULARS AND DETAILS A VAILABLE AND AMOUNT PAYABLE COULD BE QUANTIFIED, THE ASSESSE E HAS TO NECESSARILY DEDUCT TAX. IN RESPECT OF VALUE ADDED S ERVICES LIKE ITA NOS.161 & 162/BANG/2019 TIMKEN ENGINEERING AND RESEARCH INDIA PVT. LTD., BANGALORE PAGE 12 OF 14 DAILY HOROSCOPES, ASTROLOGY, CUSTOMER ACQUISITION F ORMS ARE ALL FROM SPECIFIC SERVICE PROVIDERS AND THESE VALUE ADDED SERVICES ARE MONITORED BY SYSTEM. THEREFORE, EVEN O N THE LAST DAY OF FINANCIAL YEAR, THE ASSESSEE COULD VERY WELL ASCERTAIN THE ACTUAL QUANTIFICATION OF THE AMOUNT PAYABLE AND THE IDENTITY OF THE PAYEE TO WHOM THE AMOUNT HAS TO BE PAID. TO THAT EXTENT, THE CONTENTION OF THE ASSESSEE THAT TH E PAYEE MAY NOT BE IDENTIFIED MAY NOT BE JUSTIFIED. THE EXACT FACTS NEED TO BE EXAMINED. HOWEVER, THIS TRIBUNAL IS OF THE CONSI DERED OPINION THAT THE MATTER NEEDS TO BE RECONSIDERED BY THE ASSESSING OFFICER. IN OTHER WORDS, THE ASSESSING OF FICER HAS TO EXAMINE WHETHER THE PAYMENT TO THE PARTY /PAYEE IS IDENTIFIABLE ON THE LAST DAY OF FINANCIAL YEAR AND WHETHER THE Q UANTUM PAYABLE BY THE ASSESSEE IS ALSO QUANTIFIED ON THE L AST DATE OF FINANCIAL YEAR. IN CASE, THE ASSESSING OFFICER FIND S THAT THE PAYEE COULD NOT BE IDENTIFIED ON THE LAST DAY OF FINANCIA L YEAR AND THE AMOUNT PAYABLE ALSO COULD NOT BE ASCERTAINED, THE A SSESSEE MAY NOT REQUIRE TO DEDUCT TAX IN RESPECT OF THAT PROVIS ION. HOWEVER, IN CASE THE PAYEE IS IDENTIFIED AND QUANTUM IS ALSO ASCERTAINABLE ON THE LAST DAY OF THE FINANCIAL YEAR, THIS TRIBUNA L IS OF THE CONSIDERED OPINION THAT THE ASSESSEE HAS TO NECESSA RILY DEDUCT TAX AT SOURCE. SINCE THE DETAILS ARE NOT AVAILABLE ON RECORD, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND T HE ISSUE OF YEAR- END PROVISION IS REMITTED BACK TO THE FILE OF THE A SSESSING OFFICER. THE ASSESSING OFFICER SHALL RE-EXAMINE THE ISSUE AFRESH ITA NOS.161 & 162/BANG/2019 TIMKEN ENGINEERING AND RESEARCH INDIA PVT. LTD., BANGALORE PAGE 13 OF 14 AS INDICATED ABOVE AND THEREAFTER DECIDE THE ISSUE IN ACCORDANCE WITH LAW AFTER GIVING REASONABLE OPPORTUNITY TO THE ASSESSEE. IT CAN BE NOTICED FROM THE HIGHLIGHTED PORTION THAT THE TRIBUNAL HAS EXPRESSED THE VIEW THAT THE TDS HAS TO BE NECESSARI LY DEDUCTED WHEN THE PAYEE DETAILS ARE AVAILABLE IN RESPECT OF EXPENDITURE FOR WHICH PROVISION WAS MADE. THE CO-ORDINATE BANGALOR E BENCH HAS ALSO EXPRESSED THE VIEW IN THE CASE OF IBM INDIA P LTD (2015) (59 TAXMANN.COM 107) THAT THE TDS PROVISIONS SHALL APPL Y TO THE YEAR END PROVISIONS. HOWEVER, IF THE PAYEE IS NOT IDENT IFIED WHEN THE PROVISION IS MADE, THEN IT WOULD BE DIFFICULT TO CO MPLY WITH THE PROVISIONS OF TDS, SINCE THE FURNISHING OF PAYEE DE TAILS ALONG WITH PAN NUMBER IS ESSENTIAL WHILE FILING STATEMENT OF T DS. HENCE, WE AGREE THE VIEW EXPRESSED BY CHENNAI BENCH OF TRIBUN AL IN THE CASE OF DISHNET WIRELESS LTD (SUPRA). ACCORDINGLY, WE H OLD THAT THE ASSESSEE IS LIABLE TO DEDUCT TAX AT SOURCE IN RESPE CT OF YEAREND PROVISIONS, WHEREVER THE PAYEE IS IDENTIFIABLE AND THE PROVISIONS OF SEC.40(A)(IA) SHALL APPLY ACCORDINGLY. SINCE THIS ISSUE REQUIRES VERIFICATION OF FACTS IN THE LIGHT OF ABOVE DIRECTI ONS, THIS ISSUE IS RESTORED TO THE FILE OF ASSESSING OFFICER. 27. IN THE RESULT, BOTH THE APPEALS OF THE ASSE SSEE ARE TREATED AS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29.04.2020. SD/- (BEENA PILLAI) JUDICIAL MEMBER SD/- (B.R. BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED 29 TH APRIL, 2020. VG/SPS ITA NOS.161 & 162/BANG/2019 TIMKEN ENGINEERING AND RESEARCH INDIA PVT. LTD., BANGALORE PAGE 14 OF 14 COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.