M/s Biocon Limited , Bangalore V. Income Tax Officer(TDS) LTU , Bangalore

ITA 2865/BANG/2018

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 3236 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-06-2021
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 06-04-2021
• Assessment Year: 2013-2014
• Appeal Filed On: 16-10-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R PREMI
• Assessee Lawyers: P C KHINCHA
• Keywords: Non-deduction of tax; Reasonable cause; TDS
• Section: 273B; 40(a)(ia); 201(1); 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA NO.2865 & 2866/BANG/2018 ASSESSMENT YEAR : 2013-14 & 2014-15 BIOCON LTD., 20 TH KM, HOSUR ROAD, ELECTRONIC CITY, BENGALURU-560 100. PAN AAACB 7416 R VS. THE INCOME-TAX OFFICER (TDS), LTU, BENGALURU. APPELLANT RESPONDENT REVENUE BY : SMT. R PREMI, JCIT ASSESSEE BY : SHRI P.C KHINCHA, C.A DATE OF HEARING : 06-04-2021 DATE OF PRONOUNCEMENT : 14-06-2021 ORDER PER BEENA PILLAI, JUDICIAL MEMBER PRESENT APPEALS HAVE BEEN FILED BY ASSESSEE AG AINST ORDER DATED 10/08/2018 PASSED BY THE LD.CIT(A)-3, BANGALO RE FOR ASSESSMENT YEAR 2013-14 ON FOLLOWING GROUNDS OF APP EAL: THE GROUNDS MENTIONED HEREIN BELOW ARE INDEPENDENT AND WITHOUT PREJUDICE TO THE OTHER GROUNDS PREFERRED BY THE APPELLANT. 1. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME-TAX APPEALS [ 'CIT(A)'] TO THE EXTENT PREJUDICIAL TO THE APPELLANT, IS BAD IN LAW AND FAC TS AND LIABLE TO BE QUASHED. 2. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (A) ERRED IN UPHOLDING THE ACTION OF THE LEARNED ASSESSING OFFIC ER ('THE LEARNED AO') THAT PAGE 2 OF 8 ITA NO.2865 & 2866/BANG/2018 TAX OUGHT TO HAVE BEEN DEDUCTED AT SOURCE IN RESPEC T OF YEAR- END PROVISIONS DEBITED TO THE PROFIT AND LOSS ACCOUNT. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN DISREGARDING THE SUBMISSION OF THE APPELLANT THAT T HE YEAR-END PROVISIONS ARE MADE BASED ON FAIR ESTIMATES IN THE LIGHT OF APPLIC ABLE ACCOUNTING STANDARDS AND GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND TH E SAME IS AN ESTIMATED LIABILITY SUBJECT TO ADJUSTMENTS BASED ON PRODUCTIO N OF VENDOR INVOICES. 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN DISREGARDING THE SUBMISSION OF THE APPELLANT THAT S UCH YEAR-END PROVISIONS WERE REVERSED IN THE IMMEDIATELY SUBSEQUENT MONTH B Y CREDITING THE PROFIT AND LOSS ACCOUNT AND THEREFORE INCOME DOES NOT ACCR UE IN THE HANDS OF PAYEE. 5. THAT ON THE FACTS AND CIRCUMSTANCE OF THE CASE, THE LEARNED CIT(A) ERRED IN DISREGARDING THE SUBMISSION OF THE APPELLANT THAT U PON CRYSTALLISATION OF LIABILITY, THE AMOUNTS PAID OR CREDITED TO THE PAYE E WERE RECORDED AS LIABILITIES DUE TO THE RESPECTIVE PARTIES AT WHICH POINT IN TIM E TAXES WERE DEDUCTED AT SOURCE. 6. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN NOT ACCEPTING THE APPELLANT'S CONTENTION THAT THE O BLIGATION TO DEDUCT TAXES AT SOURCE WOULD HAVE TO BE DETERMINED AS PER THE RELEV ANT WITHHOLDING TAX PROVISIONS UNDER CHAPTER XVJI-B OF THE ACT. MERELY BECAUSE AN AMOUNT IS DISALLOWED UNDER SECTION 40(A)(I)/(IA) OF THE ACT, THE SAME CANNOT BE SUBJECT TO LEVY OF INTEREST UNDER SECTION 201(1A) OF THE ACT. 7. WITHOUT PREJUDICE TO THE ABOVE GROUND, THE LEARN ED CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT THE AMOUNT SUO MOTO DISA LLOWED BY THE APPELLANT UNDER SECTION 40(A)(IA) OF THE ACT SHOULD NOT BE FU RTHER SUBJECTED TO THE PROVISIONS OF SECTION 201 OF THE ACT IN THE HANDS O F THE DEDUCTOR. 8. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN UPHOLDING THE ACTION OF THE LEARNED AO ON LEVY OF I NTEREST UNDER SECTION 201(1A) OF THE ACT. THE ASSESSEE CRAVES LEAVE TO ADD, ALTER, VARY, OMIT , SUBSTITUTE OR AMEND THE ABOVE GROUNDS, AT ANY TIME BEFORE OR AT THE TIME OF HEARING. EACH OF THE ABOVE GROUNDS IS INDEPENDENT AND WITHOUT PREJUDICE TO THE OTHER GROUNDS PREFERRED BY THE ASSESSEE. 2. BRIEF FACTS OF THE CASE ARE AS UNDER: THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAG ED IN THE MANUFACTURE AND SALE/LICENSING OF ACTIVE PHARMACEUT ICAL INGREDIENTS AND TRADING OF CERTAIN PHARMA FORMATION S. 3. THE LD.ACIT, TDS CIRCLE 3(1) INITIATED PROCEEDIN GS UNDER SECTION 201(1) OF THE ACT, REQUIRING ASSESSEE TO SH OW CAUSE AS TO PAGE 3 OF 8 ITA NO.2865 & 2866/BANG/2018 WHY, IT SHOULD NOT BE TREATED AS ASSESSEE IN DEFAU LT FOR NON- DEDUCTION OF TAX AT SOURCE UNDER THE ACT, FOR DISAL LOWANCE MADE UNDER SECTION 40(A)(IA) OF THE ACT. 4. ASSESSEE IN RESPONSE FILED REPLY TO THE SHOW CAU SE NOTICE WHEREIN IT WAS SUBMITTED THAT IT HAS CREATED YEAR-E ND PROVISION FOR EXPENSES AMOUNTING TO RS.21,98,26,517/- THE ASS ESSEE VOLUNTARILY DISALLOWED THE SAID SUM UNDER SECTION 4 0(A)(IA) OF THE ACT, ON ACCOUNT OF NON-DEDUCTION OF TDS AND THAT TH E PROVISION CREATED WAS NOT CREDITED TO ANY PARTIES OR INDIVIDU ALS ACCOUNT, SINCE QUANTUM OF PAYMENT TO THE PARTIES WAS NOT DET ERMINABLE AS ON THE YEAR-END. FURTHER ASSESSEE HAD NOT DEDUCTED TAX AT SOURCE/SHORT DEDUCIOTN ON A SUMOF RS.20,70,756/-. I T WAS THUS SUBMITTED THAT, THERE IS A REASONABLE CAUSE TO BELI EVE THAT TAX SHOULD NOT BE DEDUCTED AT SOURCE ON THE YEAR-END PR OVISION. 5. THE LD.AO ACCORDINGLY CALLED ON ASSESSEE TO CONF RONT ON THE ISSUES OF NON DEDUCTION OF TDS. THE ASSESSEE SUBMI TTED THAT THE TAX WAS DEDUCTED IN THE SUBSEQUENT ASSESSMENT YEARS AND FURNISHED DETAILS OF THE SAME. THE LD.AO ACCORDING LY LEVIED INTEREST U/S 201(1A) FOR DELAY IN REMITTANCE OF TDS BY ASSESSEE. 6. AGGRIEVED BY THE ORDER PASSED BY THE LD.AO, ASSE SSEE PREFERRED APPEAL BEFORE THE LD.CIT(A). 7. BEFORE LD.CIT(A) ASSESSEE CONTENDED THAT THESE W ERE END PROVISIONS THAT WERE RESERVED IN SUBSEQUENT FINANCI AL YEAR AND BASED ON INVOICES RAISED BY THE VENDORS WERE ACCOUN TED IN THE BOOKS OF ACCOUNT AFTER DEDUCTING TDS. THE ASSESSEE SUBMITTED THAT ASSESSEE HAS DISALLOWED THE SAID AMOUNT U/S 40 (A)(IA) PAGE 4 OF 8 ITA NO.2865 & 2866/BANG/2018 DURING THE RELEVANT PERIOD. IT WAS ALSO SUBMITTED THAT, SUCH WAS A CONSISTENT APPROACH FOLLOWED BY ASSESSEE FROM YEA R TO YEAR BASIS. ASSESSEE IN SUPPORT RELIED ON THE DECISION O F HONABLE SUPREME COURT IN CASE OF CIT VS ELI LILLY & CO. (INDIA) (P.) LTD. REPORTED IN ( 2009) 178 TAXMAN 505 . 8. THE LD. CIT (A) AFTER CONSIDERING VARIOUS DECISI ONS RELIED BY THE ASSESSEE DECIDED THE ISSUE AS UNDER: IN VIEW OF THE AFOREMENTIONED ARGUMENTS, JUDICIAL PRECEDENTS AND GIVEN THAT: THE COMPANY HAS SUO MOTO DISALLOWED THE AMOUNT UNDE R SECTION 40(A)(IA) IN THE RETURN OF INCOME; THE COMPANY HAS ALSO DEDUCTED AND PAID TDS IN THE N EXT YEAR; AND THE COMPANY HAS ALSO PAID THE INTEREST UNDER SECTIO N 201(1A) OF THE ACT DEMONSTRATES THAT THE COMPANY DI D NOT HAVE ANY MALAFIDE INTENTION AND IT HAS REASONABLE C AUSE FOR NON-DEDUCTION OF TAX. HENCE, THE APPELLANT SUBMITS THAT THE LEVY OF PENALTY UNDER SECTION 271C IS ERRONEOUS IN LAW AND LIABLE TO BE DROPPED. 10. THE SUBMISSIONS OF APPELLANT HAS BEEN CONSIDERE D. IT IS MAINLY EMPHASIZED THAT: AT THE TIME PROVISION WAS CREATED IN THE BOOKS OF A CCOUNT, THE ISSUE OF DEDUCTION OF TAXES AT SOURCE WAS NOT A SET TLED ISSUE. AS SUBMITTED BY THE APPELLANT, THE PROVISIONS CREAT ED WITH RESPECT TO DEALERS COMMISSION ARE TO BE PAID TO THE DEALERS ON THE SALES EFFECTED BY THEM. SUCH COMMISSION IS PAYA BLE TO THE DEALERS AS A PERCENTAGE OF SALE ONLY ON ACTUAL REAL IZATION OF SALE PROCEEDS. SIMILARLY WITH RESPECT TO PROVISIONS FOR PAYMENTS TO CONTRACTORS ON WHICH TDS WAS REQUIRED T O BE DEDUCTED, WHEREIN THE PROVISIONS ARE CREATED ON THE BASIS OF AGREEMENTS ENTERED INTO WITH THE CONTRACTORS WHERE GROSS AMOUNT PAYABLE TO THE VENDOR IS NOT FIXED. ALSO, IT WOULD BE PERTINENT TO NOTE THAT VARIOUS TRIBUNALS AND COURTS HAVE DIVERGENT VIEWS ON THIS ISSUE, AS CAN BE SEEN FROM THE ABOVE DISCUSSION AND THIS FACT IN ITSELF IS A REASONABLE CAUSE FOR THE APPELLANT FOR NON-DEDUCTION OF TAX ON YEAREND PROVI SIONS. PAGE 5 OF 8 ITA NO.2865 & 2866/BANG/2018 THE APPELLANT ALSO STATES THAT IT HAS SUO MOTO DISA LLOWED THE AMOUNT UNDER SECTION 40(A)(IA) IN THE RETURN OF INC OME. FURTHER, IT HAS ALSO DEDUCTED AND PAID TDS IN THE NEXT YEAR AND HAS ALSO PAID THE INTEREST UNDER SECTION 201(1A) OF THE ACT AND IT DEMONSTRATES THAT THE APPELLANT DID NOT HAVE ANY MA LAFIDE INTENTION AND IT HAS REASONABLE CAUSE FOR NON-DEDUC TION OF TAX. THE APPELLANT HAS RELIED ON ITS OWN CASE I.E. WIPRO GE MEDICAL SYSTEMS LTD. (SUPRA) WHERE THE BANGALORE ITAT HAS A LLOWED RELIEF TO THE APPELLANT WHERE THE AMOUNT OF TAX WAS ALREADY PAID TO THE DEPARTMENT AND THE INTEREST UNDER SECTI ON 201(1A) OF THE ACT FOR THE PERIOD OF NON-DEDUCTION WAS ALSO PAID. HENCE, THERE WAS NO AMOUNT DUE TO THE GOVERNMENT UNDER SEC TION 201(1) OF THE ACT AND ALSO THERE AS REASONABLE CAUS E FOR NON- DEDUCTION OF TAX AT SOURCE AT THE TIME OF CREATING OF PROVISION. 9. FURTHER THE LD.COUNSEL PLACED RELIANCE ON DECISI ON OF HONBLE KARNATAKA HIGH COURT IN CASE OF KARNATAKA POWER TRANSMISSION CORPORATION LTD. VS DCIT REPORTED IN (2016) 383 ITR 59, WHEREIN IT HAS BEEN HELD THAT THE FOR PURPOSE OF D EDUCTING TAX AT SOURCE THE INCOME WHICH FINALLY PARTAKES CHARACT ER ALONE IS ALLOWABLE FOR DEDUCTION UNDER THE ACT. IF THE AMOUN T IS NOT CONSIDERED TO BE INCOME IN THE HANDS OF THE DEDUCTE E, THE PROVISION OF TAX DEDUCTED AT SOURCE WOULD NOT BE MA DE APPLICABLE. 10. IN THE PRESENT FACTS OF THE CASE, THE PROVISION CREATED AT THE END OF THE ACCOUNTING YEAR HAS NOT BEEN CREDITED TO THE RELEVANT PARTIES TO WHOM THE PAYMENTS HAS TO BE MADE FOR THE REASON THAT IT WAS UNQUANTIFIABLE. FURTHER, ASSESSEE HAS SUO MOTO DISALLOWED THE SAID SUM UNDER SECTION 40(A)(IA) FOR NON-DEDUCT ION OF TDS. THEREFORE THERE IS A SUFFICIENT AND REASONABLE CAUS E FOR NOT DEDUCTING TDS ON THE YEAR-END PROVISION. IT IS ALSO OBSERVED THAT PAGE 6 OF 8 ITA NO.2865 & 2866/BANG/2018 ASSESSEE CONSISTENTLY FOLLOWS THIS KIND OF ACCOUNTI NG SYSTEM FOR YEAR-END PROVISIONS WHICH IS SUBSEQUENTLY REVERSED IN THE SUBSEQUENT YEAR IN THE MONTH OF APRIL, AS AND WHEN THE BILLS ARE RECEIVED, AND THE PAYMENT IS MADE TO THE PAYEE BY D EDUCTING TDS. FURTHER, ADMITTEDLY, ASSESSEE HAS PAID INTERES T UNDER SECTION 201(1A) WHICH FURTHER DEMONSTRATES THERE WA S NO MALAFIDE INTENTION. WE ALSO NOTE THAT UNDER SIMILAR CIRCUMSTANCES IN ASSESSEES OWN CASE REPORTED IN (2005) 3 SOT 627 , COORDINATE BENCH OF THIS TRIBUNAL ON SIMILAR FACTS DELETED PENALTY AS IT WAS UNSUSTAINABLE. FURTHER THE DECISI ONS RELIED BY THE LD.SR.DR ARE DISTINGUISHABLE ON FACTS, AND THER EFORE NOT APPLICABLE TO THE PRESENT FACTS OF THE CASE. BASED ON THE ABOVE OBSERVATIONS WE DO NOT FIND ANY INFIRMITY IN THE VI EW TAKEN BY THE LD.CIT(A) TO DELETE THE PENALTY LEVIED UNDER SECTIO N 271C READ WITH 273B OF THE ACT DUE TO EXISTENCE OF REASONABLE CAUSE FOR NON-DEDUCTION OF TDS, AND THEREFORE, ASSESSEE CANNO T BE HELD TO BE ASSESSEE IN DEFAULT. 11. ACCORDINGLY, GROUNDS RAISED BY ASSESSEE STANDS DISMISSED. 12. IN THE RESULT APPEAL FILED BY ASSESSEE STANDS D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH JUNE, 2021 SD/- SD/- (CHANDRA POOJARI) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL ME MBER BANGALORE, DATED, THE 14 TH JUNE, 2021. /VMS/ PAGE 7 OF 8 ITA NO.2865 & 2866/BANG/2018 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE PAGE 8 OF 8 ITA NO.2865 & 2866/BANG/2018 DATE INITIAL 1. DRAFT DICTATED ON ON DRAGON SR.PS 2. DRAFT PLACED BEFORE AUTHOR -6-2021 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER -6-2021 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. -6-2021 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS -6-2021 SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON -6-2021 SR.PS 7. DATE OF UPLOADING THE ORDER ON WEBSITE -6-2021 SR.PS 8. IF NOT UPLOADED, FURNISH THE REASON -- SR.PS 9. FILE SENT TO THE BENCH CLERK -6-2021 SR.PS 10. DATE ON WHICH FILE GOES TO THE AR 11. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 12. DATE OF DISPATCH OF ORDER. 13. DRAFT DICTATION SHEETS ARE ATTACHED NO SR.PS