Dy.CIT, Circle-14(2), Hyderabad V. M/s NTT Data India Enterprises Services Private Ltd., Hyderabad

ITA 312/HYD/2013

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2677 (ITAT-HYDERABAD)
• Duration Of Justice: 4 year(s) 5 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 27-07-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 11-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN MALIK
• Assessee Lawyers: CHAVALI NARAYANA
• Section: 133A; 194C; 201(1); 6

Judgement Text

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- TAX, CIRCLE 14 (2), HYDERABAD. VS. M/S NTT DATA INDIA 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 R D E R PER S. RIFAUR RAHMAN, A.M.: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST 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 ASSES SEE 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 PROVIS IONS 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 A ND PROFESSIONAL SERVICES AS ON 31.03.2009. SINCE THE ASSESSEE FAILE D TO FURNISH BREAKUP OF THE ABOVE EXPENSES OUT OF THE PROVISIONS MADE AND ALSO THE DETAILS OF TDS MADE AND THE REMITTANCE OF THE S AME, THE ASSESSING OFFICER CALCULATED TDS PAYABLE U/S.194C A ND 194J AND 2 ITA NO. 312/H/13 M/S NTT DATA INDIA ENTERPRISES APPLICATION SERVICES PVT. LTD. 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 PREFE RRED AN APPEAL BEFORE THE CIT(A). 4. DURING THE APPEAL PROCEEDINGS IT WAS SUBMITTED T HAT 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 CLOSI NG THE BOOKS OF ACCOUNTS FOR THE YEAR ENDING 31.03.2009. THIS IS TH E ACCOUNTING TREATMENT THE ASSESSEE HAS BEEN FOLLOWING CONSISTEN TLY. IT MAKES ADHOC PROVISIONS OF ESTIMATED EXPENSES WITHOUT CRED ITING THE SAME TO ANY SPECIFIC VENDOR ACCOUNT. THE FOLLOWING IS THE A CCOUNTING TREATMENT, BEING CONSISTENTLY FOLLOWED BY THE APPEL LANT COMPANY, TOWARDS THE YEAR END PROVISIONS - MAKE AD-HOC PROVISIONS OF ESTIMATED EXPENSES WITH OUT 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 COMPAN Y WHILE FILING CORPORATE RETURN OF INCOME. THE SAID PROVISION IS SUBSEQUENTLY REVERSED IN TH E 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 A NY. THE SAID TDS LIABILITY IS DISCHARGED WITHIN THE D UE 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 SERVI CE AND TAX WAS 3 ITA NO. 312/H/13 M/S NTT DATA INDIA ENTERPRISES APPLICATION SERVICES PVT. LTD. 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. V S. ITO (TDS) IN ITA NO. 1667 /MUM/2010. 5. THE CIT(A) ASKED THE ASSESSEE TO PRODUCE COPY O F LEDGER ACCOUNT TO SUPPORT THE CONTENTION THAT THE PROVISIO N 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 COMPUTA TION OF INCOME TO SUBSTANTIATE THE CLAIM THAT THE PROVISION HAS BEEN DISALLOWED WHILE COMPUTING TAXABLE INCOME FOR THE YEAR UNDER CONSIDE RATION. THE APPELLANT HAD SUBMITTED THE STATEMENT SHOWING COMPU TATION OF INCOME WHEREIN THE AMOUNT OF RS.2,12,85,666/- HAD B EEN ADDED UNDER THE HEAD 'EXPENSES DISALLOWED U/ S.40(A)(IA) ON PROVISION OF EXPENSES' TO THE PROFIT. A STATEMENT ENCLOSED TO FO RM 3CD HAD BEEN FURNISHED WHEREIN THE TAX DEDUCTIBLE AND NOT DEDUCT ED AT ALL IS SUBMITTED. FURTHER, THE ASSESSEE ALSO PRODUCED A CE RTIFICATE ISSUED BY M/S VINAY K. GOEL & ASSOCIATES, CAS, DATED 10/12 /2012 WHEREIN IT WAS SUBMITTED THAT THE ASSESSEE HAD ACCOUNTED FOR A N 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 E XPENDITURE WHICH WAS PROVIDED ON 31/03/2009 IN THE BOOKS OF ACCOUNTS IN THE COMPUTATION OF INCOME AND THE CONTENTION THAT TDS C ANNOT BE MADE WHEN DEDUCTEE OF THE AMOUNTS IS NOT ASCERTAINABLE A PPEARS 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. V S. ITO (TDS) (SUPRA), ON WHICH RELIANCE IS PLACED BY THE ASSESSE E. 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/13 M/S NTT DATA INDIA ENTERPRISES APPLICATION SERVICES PVT. LTD. 7. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENU E IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUND OF APPEAL: 1. THE CIT(APPEALS) ERRED ON RELYING THE CASE OF PF IZER 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 SECTI ONS 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 TH E 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 BANGALO RE, 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 TH E 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 ISS UE, HELD AS UNDER: 6. WE HAVE CONSIDERED THE ISSUE AND EXAMINED THE RIVA L CONTENTIONS. THERE IS NO DISPUTE WITH REFERENCE TO THE FACT THAT ASSESSEE HAS ONLY MADE THE PROVISIONS WITHOUT IDENT IFYING THE PARTIES AS A LIABILITY IN THE YEAR AND ACTUAL AMOUN TS WERE CREDITED IN A LATER YEAR ON WHICH TDS WAS MADE. IT IS ALSO A FACT THAT IN THE COMPUTATION OF INCOME, ASSESSEE HAS ADD ED BACK THE ENTIRE PROVISION AND HAS NOT CLAIMED ANY DEDUCT ION. THESE FACTS ARE SIMILAR TO THE FACTS OF PFIZER LTD. (SUPR A), RELIED ON BY THE CIT(A) AND THE DECISION WAS EXTRACTED AS PART O F 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 T AX, AS THE AMOUNTS ARE NOT COVERED BY THE PROVISIONS OF SECTIO N 194C TO 194J. NOT ONLY THAT A.O. HAS ONLY RAISED THE INTERE ST 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 NTT DATA INDIA ENTERPRISES APPLICATION SERVICES PVT. LTD. CIT(A) THAT ASSESSEE WAS NOT HELD AS 'ASSESSEE IN D EFAULT' AND THEREFORE, ON THIS REASON ALSO INTEREST CANNOT BE L EVIED 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 C LAIMS MADE IN THAT YEAR. 7. LEARNED D.R. HOWEVER, RELIED ON THE COORDINATE B ENCH DECISION IN THE CASE OF AGREENCO FIBRE FOAM (P) LTD ., VS. ITO (TDS), KANNUR (SUPRA). THE FACTS IN THE SAID CASE A RE THAT ASSESSEE IS A PRIVATE LIMITED COMPANY AND CREDITED INTEREST TO THE SISTER CONCERNS DURING THE YEAR UNDER CONSIDERA TION WITHOUT DEDUCTING TAX AT SOURCE. NOT ONLY THAT A.O. TREATED ASSESSEE AS 'ASSESSEE IN DEFAULT' AND RAISED DEMAND UNDER SECTI ON 201 OF THE ACT EQUAL TO THE AMOUNT OF TAX DEDUCTIBLE AT SO URCE. 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 A T ALL, ASSESSEE SHALL BE LIABLE TO DEDUCT TAX AT SOURCE UN DER SECTION 194A OF THE ACT ON THE INTEREST AMOUNT SO PAID/ CRE DITED AS THE SAID PAYMENT WAS LIABLE TO TAX DEDUCTION AT SOURCE. THE BENCH DISTINGUISHED THE DECISION OF THE PFIZER LTD. VS. I TO (SUPRA) WHILE GIVING THE JUDGMENT THEREIN. SINCE THE FACTUA L CONDITIONS CONSIDERED IN THE DECISION OF PFIZER LTD. VS. ITO ( SUPRA) ARE SIMILAR TO ASSESSEE'S CASE AND ARE DIFFERENT FROM T HE FACTS IN THE SAID CASE OF AGREENCO FIBRE FOAM (P) LTD., VS. ITO (TDS), KANNUR (SUPRA), WE ARE NOT CONVINCED WITH THE ARGUM ENTS OF THE LEARNED D.R. SINCE THE LD. CIT(A) ORDER IS IN TUNE WITH THE COORDINATE BENCH DECISIONS ON THE ISSUE ON THE GIVE N 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 COORDI NATE 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 L INE WITH THE DECISION OF THE COORDINATE BENCH AND DISMISS THE GR OUND 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 S AME CANNOT BE SUBJECT TO THE PROVISIONS OF SECTION 201(1). BOTH T HE SECTIONS ARE 6 ITA NO. 312/H/13 M/S NTT DATA INDIA ENTERPRISES APPLICATION SERVICES PVT. LTD. INDEPENDENT AND NOT INTER CHARGEABLE. WE ARE ALSO IN AGREEMENT WITH THE STATEMENT THAT SECTION 40(A)(IA) AND SECTI ON 201(1) ARE INDEPENDENT. THE SECTION 201(1) WILL GET ATTRACTED ONLY WHEN THE ASSESSEE IS LIABLE TO DEDUCT TAX AND FAILED TO DEDU CT TAX. THE PROVISION OF SECTION 201(1)(A), IS EXTRACTED BELOW: 201 (1) WHERE ANY PERSON, INCLUDING THE PRINCIPAL O FFICER 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 DE DUCTED IN ACCORDANCE WITH THE ACT. THE IMPORTANT THING IS, TH E PROVISION OF INCOME-TAX HAS TO BE ATTRACTED ON THE ASSESSEE IN T HE FIRST PLACE, THEN, THE LIABILITY TO DEDUCT WILL FOLLOW. WHEN THE ASSESSEE HAS NOT IDENTIFIED THE PERSON TO WHOM CREDIT HAS TO BE GIVE N AND ASSESSEE ITSELF HAS NOT CLAIMED THE ABOVE EXPENSES AS A DEDU CTION, THE PROVISION OF INCOME-TAX ACT IS NOT ATTRACTED. HENCE , THERE IS NO LIABILITY ON THE PART OF THE ASSESSEE TO DEDUCT. WH EN 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 ASSE SSEE HAS DEBITED THE PROVISION IN THE P&L A/C ON ADHOC BASIS AND DISALLO WED IN THE COMPUTATION STATEMENT, IT MEANS THE ASSESSEE HAS NO T CLAIMED ANY EXPENDITURE. WHEN THE EXPENDITURE ITSELF IS NOT CLA IMED, THE PROVISION OF THE ACT WILL NOT GET ATTRACTED. ACCORDINGLY, THE PROVISIONS OF SECTION 201(1) ARE NOT ATTRACTED IN THE ASSESSEES CASE. 11. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. PRONOUNCED IN THE OPEN COURT ON 23 RD AUGUST, 2017. SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RAH MAN) JUDICIAL MEMBER ACC OUNTANT MEMBER HYDERABAD, DATED: 23 RD AUGUST, 2017. 7 ITA NO. 312/H/13 M/S NTT DATA INDIA ENTERPRISES APPLICATION SERVICES PVT. LTD. 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., HYDE RABAD. 6) GUARD FILE