M/s. Apollo Tyres Ltd., Gurgaon V. DCIT (TDS), Gurgaon

ITA 3216/DEL/2015

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7088 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 7 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 02-11-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 20-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K SAROHA
• Keywords: Opportunity of being heard; Non-deduction of tax
• Section: 194C; 201(1); 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH BENCH BENCH BENCH C CC C : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI BEFORE SHRI BEFORE SHRI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT G.D. AGRAWAL, VICE PRESIDENT G.D. AGRAWAL, VICE PRESIDENT G.D. AGRAWAL, VICE PRESIDENT AND AND AND AND SHRI CHANDRA MOHAN GARG SHRI CHANDRA MOHAN GARG SHRI CHANDRA MOHAN GARG SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER ITA NO ITA NO ITA NO ITA NO . .. . 3215/DEL/2015 & 3216/DEL/2015 3215/DEL/2015 & 3216/DEL/2015 3215/DEL/2015 & 3216/DEL/2015 3215/DEL/2015 & 3216/DEL/2015 ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : 2010 2010 2010 2010 - -- - 11 & 2011 11 & 2011 11 & 2011 11 & 2011 - -- - 12 1212 12 M/S APOLLO TYRES LIMITED, M/S APOLLO TYRES LIMITED, M/S APOLLO TYRES LIMITED, M/S APOLLO TYRES LIMITED, PLOT NO.7, INSTITUTIONAL AREA, PLOT NO.7, INSTITUTIONAL AREA, PLOT NO.7, INSTITUTIONAL AREA, PLOT NO.7, INSTITUTIONAL AREA, SECTOR SECTOR SECTOR SECTOR- -- -32, GURGAON, 32, GURGAON, 32, GURGAON, 32, GURGAON, HARYANA. HARYANA. HARYANA. HARYANA. TAN : RTKAO3480B. TAN : RTKAO3480B. TAN : RTKAO3480B. TAN : RTKAO3480B. VS. VS. VS. VS. DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, TDS CIRCLE, TDS CIRCLE, TDS CIRCLE, TDS CIRCLE, GURGAON. GURGAON. GURGAON. GURGAON. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI DEEPAK CHOPRA, ADVOCATE. RESPONDENT BY : SHRI A.K. SA ROHA, CIT - DR. DATE OF HEARING : 10.11.2016 10.11.2016 10.11.2016 10.11.2016 DATE OF PRONOUNCEMENT : 10.01.2017 10.01.2017 10.01.2017 10.01.2017 ORDER ORDER ORDER ORDER PER G.D. AGRAWAL, VP PER G.D. AGRAWAL, VP PER G.D. AGRAWAL, VP PER G.D. AGRAWAL, VP : :: :- -- - THESE TWO APPEALS BY THE ASSESSEE FOR THE ASSESSME NT YEAR 2010-11 AND 2011-12 ARE DIRECTED AGAINST THE ORDER OF LEARNED CIT(A)- 1, GURGAON DATED 16 TH MARCH, 2015. ITA NO.3215/DEL/2015 ITA NO.3215/DEL/2015 ITA NO.3215/DEL/2015 ITA NO.3215/DEL/2015 ASSESSEES APPEAL FOR AY 2010 ASSESSEES APPEAL FOR AY 2010 ASSESSEES APPEAL FOR AY 2010 ASSESSEES APPEAL FOR AY 2010- -- -11 : 11 : 11 : 11 :- -- - 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLL OWING GROUNDS :- 1. THAT THE LD. ASSESSING OFFICER (AO') AND/OR LD . COMMISSIONER OF INCOME TAX (APPEALS) (CIT(A)) GRO SSLY ERRED IN TREATING APPELLANT AS AN ASSESSEE IN DEFA ULT FOR NON-DEDUCTION OF TAX AT SOURCE ON PROVISIONS AMOUNT ING TO INR 15,07,25,637/- UNDER SECTION 201(1) OF THE INCO ME TAX ACT, 1961 (ACT). 2. THAT THE ORDER PASSED BY LD.CIT(A) IS PERVERSE I N LAW (AS REGARDS IT GIVES NO FACTUAL FINDING IN ASCERTAI NING TRUE NATURE OF INDIVIDUAL TRANSACTION AND IS SILENT ABOU T THE ITA-3215 & 3216/D/2015 2 DETAILS AND EVIDENCES FURNISHED BY APPELLANT) WHEN THE COMPLETE DETAILS WERE FILED DURING APPELLATE PROCEE DINGS. 3. THAT THE LD.CIT(A)/AO ERRED ON FACTS AND IN LAW IN HOLDING THAT TAX OUGHT TO HAVE BEEN DEDUCTED AT SOU RCE ON PROVISION FOR CONFERENCE EXPENSES AMOUNTING TO INR 4,00,00,000/-. 3.1 THAT THE LD.CIT(A) ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT THE PARTIES TO WHOM CONFERENCES EXPENSES WERE TO BE PAID WERE NOT IDENTIFIABLE AT T HE TIME OF MAKING PROVISION AND HENCE TAX COULD NOT HAVE BE EN DEDUCTED AT THAT POINT OF TIME. 3.2 WITHOUT PREJUDICE TO THE ABOVE, THE LD.CIT(A)/A O ERRED ON FACTS AND IN LAW IN TREATING APPELLANT AS AN ASSESSEE IN DEFAULT WHEN THE PROVISION WAS REVERS ED IN SUBSEQUENT YEAR AND TAX WAS DEDUCTED ON ACTUAL EXPE NSES BOOKED IN ACCOUNTS WHEREOF RESULTING IN DOUBLE TAXA TION. 4. THAT THE LD.CIT(A) HAS ERRED ON FACTS AND IN LAW IN HOLDING THAT TAX OUGHT TO HAVE BEEN DEDUCTED AT SOU RCE ON PROVISION FOR BUSINESS DEVELOPMENT INITIATIVE EXPEN SES AMOUNTING TO INR 1,25,61,825/-. 4.1 THAT THE LD. CIT(A)/AO ERRED ON FACTS AND IN LA W IN NOT APPRECIATING THAT EXPENSES RELATING TO BUSINESS DEVELOPMENT INITIATIVE WERE NOT ASCERTAINABLE AT TH E TIME OF FINALIZING THE BOOKS OF ACCOUNTS FOR THE RELEVAN T ASSESSMENT YEAR AND THUS, AS SUCH TANTAMOUNT TO ASK APPELLANT TO PERFORM IMPOSSIBLE ACT, WHICH IS NOT PERMISSIBLE UNDER LAW. 4.2 WITHOUT PREJUDICE TO THE ABOVE, THE LD.CIT(A)/A O ERRED ON FACTS AND IN LAW IN TREATING APPELLANT AS AN ASSESSEE IN DEFAULT WHEN THE PROVISION WAS REVERS ED IN SUBSEQUENT YEAR AND TAX WAS DEDUCTED ON ACTUAL EXPE NSES BOOKED IN ACCOUNTS WHEREOF RESULTING IN DOUBLE TAXA TION. 5. THAT THE LD.CIT(A)/AO GROSSLY ERRED ON FACTS AND IN LAW IN HOLDING THAT TAX OUGHT HAVE BEEN DEDUCTED AT SOURCE ON PROVISION FOR BUSINESS DEVELOPMENT CONFER ENCES AMOUNTING TO INR 5,00,00,000/-. 5.1 WITHOUT PREJUDICE TO THE ABOVE, THE LD.CIT(A)/A O ERRED ON FACTS AND IN LAW IN TREATING APPELLANT AS AN ASSESSEE IN DEFAULT WHEN THE PROVISION WAS REVERSED/ADJUSTED ON THE BASIS OF ACTUAL EXPENDITUR E ITA-3215 & 3216/D/2015 3 INCURRED IN THE SUBSEQUENT YEAR AND TAX WAS DEDUCTE D ON ACTUAL EXPENSES BOOKED IN ACCOUNTS WHEREOF RESULTIN G IN DOUBLE TAXATION. 6. THAT THE LD.CIT(A)/AO GROSSLY ERRED ON FACTS AND IN LAW IN HOLDING THAT TAX OUGHT HAVE BEEN DEDUCTED AT SOURCE ON PROVISION FOR PRODUCT PUBLICITY EXPENSES OUTSIDE INDIA AMOUNTING TO INR 4,58,14,000/-. 6.1 WITHOUT PREJUDICE TO THE ABOVE, THE LD.CIT(A)/A O ERRED ON FACTS AND IN LAW IN TREATING APPELLANT AS AN ASSESSEE IN DEFAULT WHEN THE PROVISION WAS ADJUST ED ON THE BASIS OF ACTUAL EXPENDITURE INCURRED IN THE SUB SEQUENT YEAR AND TAX WAS DEDUCTED ON ACTUAL EXPENSES BOOKED IN ACCOUNTS WHEREOF RESULTING IN DOUBLE TAXATION. 6.2 THAT THE LD.CIT(A)/AO ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT THERE IS NO INCOME ELEMENT IN R EGARD TO THE EXPENSES PAID TO THE FOREIGN DEALERS ON COST TO COST BASIS AS REIMBURSEMENT. 7. THAT THE LD.CIT(A)/AO ERRED ON FACTS AND IN LAW IN HOLDING THAT TAX OUGHT TO HAVE BEEN DEDUCTED AT SOU RCE ON PROVISION OF INR 19,64,000/- CREATED ON COMMISSION PAID TO DOMESTIC SELLING AGENTS. 7.1 WITHOUT PREJUDICE TO THE ABOVE, THE LD.CIT(A)/A O ERRED ON FACTS AND IN LAW IN TREATING APPELLANT AS AN ASSESSEE IN DEFAULT WHEN THE PROVISION WAS REVERSED/ADJUSTED ON THE BASIS OF ACTUAL EXPENDITUR E INCURRED IN THE SUBSEQUENT YEAR AND TAX WAS DEDUCTE D ON ACTUAL EXPENSES BOOKED IN ACCOUNTS WHEREOF RESULTIN G IN DOUBLE TAXATION. 8. THAT THE LD.CIT(A)/AO ERRED ON FACTS AND IN LAW IN HOLDING THAT TAX OUGHT TO HAVE BEEN DEDUCTED AT SOU RCE ON YEAR END PROVISION ON COMMISSION PAID TO SELLING AG ENTS FOR CLEARING & FORWARDING AMOUNTING TO INR 3,85,812/-. 8.1 WITHOUT PREJUDICE TO THE ABOVE, THE LD.CIT(A)/A O ERRED ON FACTS AND IN LAW IN TREATING APPELLANT AS AN ASSESSEE IN DEFAULT WHEN THE PROVISION WAS ADJUST ED ON THE BASIS OF ACTUAL EXPENDITURE INCURRED IN THE SUB SEQUENT YEAR AND TAX WAS DEDUCTED ON ACTUAL EXPENSES BOOKED IN ACCOUNTS WHEREOF RESULTING IN DOUBLE TAXATION. 9. THAT THE LD.CIT(A)/AO ERRED ON FACTS AND IN LAW IN LEVYING INTEREST UNDER SECTION 201(1A) OF THE ACT. ITA-3215 & 3216/D/2015 4 10. THAT THE LD.CIT(A)/AO ERRED ON FACTS AND IN LAW IN CHARGING AN AD-HOC RATE FOR COMPUTING ALLEGED LIABI LITY ON DEDUCTING TAX AT SOURCE IN RESPECT TO THE YEAR END PROVISION. 3. AT THE TIME OF HEARING BEFORE US, IT WAS ADMITTE D BY BOTH THE SIDES THAT THE GROUNDS RAISED BY THE ASSESSEE IN IT S APPEAL IN ITA NO.3216/DEL/2015 ARE IDENTICAL TO THE GROUNDS AS RA ISED IN ITA NO.3215/DEL/2015. 4. THE FACTS OF THE CASE ARE THAT A TDS SURVEY WAS CONDUCTED BY THE ACIT, TDS CIRCLE, GURGAON ON 5 TH AUGUST, 2011 AT THE PREMISES OF THE ASSESSEE COMPANY AT GURGAON. THEREAFTER, THE S UMMONS WERE ISSUED U/S 131 OF THE INCOME-TAX ACT, 1961 ASKING F OR DETAILS/INFORMATION FOR THE FINANCIAL YEAR 2009-10, 2010-11 AND 2011- 12, IN RESPONSE TO WHICH, NECESSARY DETAILS WERE FU RNISHED BY THE ASSESSEE. THEREAFTER, THE ASSESSING OFFICER PASSED THE ORDER U/S 201 AND 201(1A) HOLDING THAT IT FAILED TO DEDUCT THE TD S IN RESPECT OF PROVISIONS MADE UNDER SEVERAL HEADS OF INCOME AMOUN TING TO `15,07,25,637/-. ACCORDINGLY, THE DEMAND U/S 201(1 ) WAS RAISED AT `1,04,02,197/- AND ALSO INTEREST U/S 201(1A) AT `38 ,48,924/-. THE DETAILS OF THE PROVISIONS OF VARIOUS HEADS OF INCOM E AND ALLEGED NON- DEDUCTION OF TAX IS AS UNDER :- HEAD OF PROVISION AMOUNT DATE OF PROVISION AMOUNT OF TDS DEMAND U/S 201(1) DELAY IN MONTHS INTEREST AMOUNT DEMAND U/S 201(1A) MISC. EXPENSES CONFERENCE EXPENSES 4,00,00,000 3 1.03.10 40,00,000 @ 10% 37 14,80,000 BUSINESS DEVELOPMENT INITIATIVE (REIMBURSEMENT TO DEALERS) 1,25,61,825 31.03.10 2,51,236 @ 2% 37 92,957 BUSINESS DEVELOPMENT CONFERENCE 5,00,00,000 31.03.10 50,00,000 @ 10% 37 18,50,000 PRODUCT PUBLICITY 4,58,14,000 31.03.10 9,16,280 @ 2% 37 3,39,024 ITA-3215 & 3216/D/2015 5 EXPENSES OUT SIDE INDIA COMMISSION TO SELLING AGENTS DOMESTIC 19,64,000 31.03.10 1,96,400 @ 10% 37 72,668 COMMISSION TO SELLING AGENTS CLEARING & FORWARDING 3,85,812 31.03.10 38,581 @ 10% 37 14,275 TOTAL 15,07,25,63 7 1,04,02,497 38,48,924 5. ON APPEAL, LEARNED CIT(A) SUSTAINED THE SAME. H ENCE, THIS APPEAL BY THE ASSESSEE. 6. AT THE TIME OF HEARING BEFORE US, IT IS SUBMITTE D BY THE LEARNED COUNSEL THAT AT THE END OF THE FINANCIAL YEAR 2010, THE ASSESSEE MADE PROVISION FOR VARIOUS EXPENSES. HE SUBMITTED THAT NEXT YEAR WHEN THE ACTUAL EXPENDITURE WAS INCURRED, THE PROVISION WAS REVERSED AND THE DEDUCTION WAS CLAIMED ON THE BASIS OF ACTUAL EXPEND ITURE INCURRED. WHEN SUCH EXPENDITURE WAS ACTUALLY INCURRED, TDS WA S MADE AS PER LAW. HE FURTHER SUBMITTED THAT WHEN THE PAYEE WAS AN IDENTIFIED PERSON, THEN EVEN WHILE MAKING THE PROVISION, THE T DS WAS DEDUCTED. BUT, WHEN THE PAYEE WAS NOT AN IDENTIFIABLE PERSON, NO TDS WAS MADE. HE SUBMITTED THAT WHEN THE PAYEE IS NOT IDENTIFIABL E, THE TDS CANNOT BE MADE FROM A LUMP SUM PROVISION MADE BY THE ASSES SEE UNDER VARIOUS HEADS OF INCOME. IN SUPPORT OF THIS CONTEN TION, HE RELIED UPON THE FOLLOWING DECISIONS :- (I) DISHNET WIRELESS LTD. VS. DCIT [2015] 60 TAXM ANN.COM 329 (CHENNAI-TRIB.). (II) INDUSTRIAL DEVELOPMENT BANK OF INDIA VS. ITO [2007] 293 ITR (AT) 267 (MUMBAI). 7. LEARNED DR, ON THE OTHER HAND, STATED THAT WHEN THE ASSESSEE MADE THE PROVISION, HE CLAIMED THE DEDUCTION FOR TH E EXPENDITURE IN THIS YEAR. PROVISION CAN BE MADE ONLY WHEN THE LIA BILITY IS AN ASCERTAINED LIABILITY. THEREFORE, THE ASSESSEE CAN NOT CLAIM THAT THE ITA-3215 & 3216/D/2015 6 PAYEE IN RESPECT OF WHOM THE LIABILITY IS CREATED I S UNIDENTIFIABLE. HE FURTHER STATED THAT AS PER PROVISION OF SECTION 194 C(2), THE TAX IS TO BE DEDUCTED AT SOURCE WHERE ANY SUM IS CREDITED TO ANY ACCOUNT WHETHER CALLED SUSPENSE ACCOUNT OR BY ANY OTHER NAME IN THE BOOKS OF ACCOUNT OF THE PERSON LIABLE TO PAY SUCH INCOME. THEREFORE , WHEN THE ASSESSEE MADE THE PROVISION IN ITS BOOKS OF ACCOUNT, THE LIA BILITY OF TDS AROSE. IN SUPPORT OF THIS CONTENTION, HE RELIED UPON THE D ECISION OF ITAT, COCHIN BENCH IN THE CASE OF ABAD BUILDERS (P) LTD. VS. ACIT [2014] 43 TAXMANN.COM 128 (COCHIN-TRIB). 8. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF BOTH THE SIDES AND HAVE PERUSED THE MATERIAL PLACED BEFORE US. TH E LIMITED DISPUTE BEFORE US IS WHETHER THE ASSESSEE CAN BE SAID TO BE IN DEFAULT FOR NOT DEDUCTING THE TDS IN RESPECT OF A PROVISION MADE AT THE YEAR END. LEARNED DR HAS RELIED UPON THE DECISION OF COCHIN B ENCH OF ITAT IN THE CASE OF ABAD BUILDERS (P) LTD. (SUPRA), WHEREIN THE LEARNED MEMBERS OF THE ITAT HELD AS UNDER :- 6.2 A CAREFUL READING OF THE PROVISIONS OF SEC. 19 4C WOULD SHOW THAT ANY PERSON RESPONSIBLE FOR PAYING A NY SUM TO ANY RESIDENT FOR CARRYING OUT ANY WORK IN PU RSUANCE OF A CONTRACT, SHALL DEDUCT THE TAX AT SOURCE EITHE R AT THE TIME OF CREDIT OF THE SAME TO THE ACCOUNT OF THE CO NTRACTOR OR AT THE TIME OF PAYMENT THEREOF, WHICHEVER IS EAR LIER. IT IS FURTHER PROVIDED IN EXPLANATION 2 OF SEC. 194C, WHICH EXISTED AT THE RELEVANT POINT OF TIME, THAT THE SAI D TDS LIABILITY WOULD ARISE EVEN IF THE AMOUNT IS CREDITE D TO ANY ACCOUNT WHETHER CALLED SUSPENSE ACCOUNT OR CALLED B Y ANY OTHER NAME. IN THE INSTANT CASE, THE LD.CIT(A) HAS OBSERVED THAT THE ASSESSEES CLAIM FOR DEDUCTION OF VERY SAM E AMOUNT IN THE SUCCEEDING YEAR WAS ALLOWED, SINCE TH E ASSESSEE HAD DEDUCTED TAX AT SOURCE THEREON IN THAT YEAR. THIS FACT SHOWS THAT THE ASSESSEE IS ACCEPTING THE POSITION THAT THE PROVISION FOR EXPENSES SO MADE IS SUSCEPTI BLE FOR DEDUCTION OF TAX AT SOURCE. FURTHER, THE PROVISION S OF SEC. 194C CLEARLY STATES THAT THE ASSESSEE IS LIABLE TO DEDUCT TAX AT SOURCE EITHER AT THE TIME OF CREDIT TO THE ACCOU NT OF THE CONTRACTOR OR AT THE TIME OF PAYMENT THEREOF, WHICH EVER IS EARLIER. IT IS FURTHER PROVIDED THAT THE SAID LIAB ILITY WOULD ITA-3215 & 3216/D/2015 7 ARISE EVEN IF THE AMOUNT IS CREDITED TO ANY OTHER A CCOUNT WHETHER CALLED SUSPENSE ACCOUNT OR BY ANY OTHER N AME. HENCE, IN OUR VIEW, THE ASSESSEE WOULD BE LIABLE TO DEDUCT TAX AT SOURCE U/S 194C ON THE AMOUNT PROVIDED UNDER THE HEAD PROVISION FOR EXPENSES. HENCE, WE REJECT TH E CONTENTIONS OF THE ASSESSEE THAT THE TDS PROVISIONS SHALL NOT APPLY TO THE PROVISION FOR EXPENSES. 9. LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTHER H AND, RELIED UPON THE DECISION OF ITAT MUMBAI BENCH IN THE CASE OF IN DUSTRIAL DEVELOPMENT BANK OF INDIA (SUPRA), WHEREIN ITAT HEL D AS UNDER :- HELD, ALLOWING THE APPEAL, THAT AS ON MARCH 31 OF THE YEAR, THE ASSESSEE HAD A LIABILITY FOR INTEREST AC CRUED BUT NOT DUE BECAUSE INTEREST WAS PAYABLE FOR THE PERIO D TILL THE END OF THE RELEVANT ACCOUNTING YEAR, ONCE ANNUA LLY ON A DATE OTHER THAN THE DATE OF CLOSURE OF ACCOUNTS B UT THE ASSESSEE HAD NO MEANS TO FIND OUT WHO COULD BE THE RECIPIENTS OF INTEREST DUE BUT NOT PAYABLE IN RES PECT OF REGULAR RETURN BONDS, THE BONDS IN QUESTION BEING FREELY TRANSFERABLE. THE ASSESSEE COULD NOT BE EXPECTED T O KNOW AS ON MARCH 31 WHO WOULD OWN THE BONDS ON MAY 15 OF THAT YEAR. THE EXPLANATION TO SECTION 193 COULD NO T BE APPLIED BECAUSE THE PAYEE WAS NOT KNOWN AT THE STAG E OF PROVISION FOR INTEREST ACCRUED BUT NOT DUE BEING MADE. THE FICTION EMBODIED IN THE EXPLANATION WAS ONLY APPLICABLE IN SITUATIONS IN WHICH TAX DEDUCTION LIA BILITY IS SOUGHT TO BE EVADED BY CREDITING INTEREST TO AN ACC OUNT OTHER THAN THAT OF THE RECIPIENT OF INTEREST. THE BONDS BEING TRANSFERRABLE BY SIMPLE ENDORSEMENT AND DELIV ERY AND THE RELEVANT REGISTRATION DATE BEING A DATE SUB SEQUENT TO THE CLOSURE OF BOOKS OF ACCOUNT, THE ASSESSEE CO ULD NOT HAVE ASCERTAINED THE PAYEES MADE. ACCORDINGLY, NO TAX WAS REQUIRED TO BE DEDUCTED AT SOURCE IN RESPECT OF THE PROVISION FOR INTEREST PAYABLE MADE BY THE ASSESSEE . TAXES HAVING BEEN DULY DEDUCTED AT SOURCE AT THE TI ME OF PAYMENT, ON JUNE 9, 1994, THERE WAS NO LOSS OF REVE NUE AS SUCH. WHEN THERE WAS NO OBLIGATION TO DEDUCT TAX A T SOURCE, THERE WAS NO QUESTION OF LEVY OF PENALTY OR INTEREST. 10. LEARNED COUNSEL HAS ALSO RELIED UPON THE DECISI ON OF ITAT, CHENNAI BENCH IN THE CASE OF DISHNET WIRELESS LTD. (SUPRA), WHEREIN THE ITAT HELD AS UNDER :- ITA-3215 & 3216/D/2015 8 24. NOW COMING TO THE ISSUE OF YEAR-END PROVISIONS , THE CONTENTION OF THE ASSESSEE IS THAT IT IS ENGAGED IN VARIOUS SERVICES LIKE ADDRESS VERIFICATIONS, CREDIT CERTIFI CATION, CONTENT DEVELOPMENT ETC. THE ASSESSEE CLAIMS THAT PROVISIONS ARE MADE ON ESTIMATION BASIS SINCE IT IS NOT IDENTIFIABLE AS TO WHAT AMOUNT HAS TO BE PAID TO TH E SERVICE PROVIDERS. IN CASE OF NEW SERVICE CONNECTIONS, THE ASSESSEE HAS TO NECESSARILY VERIFY THE CUSTOMERS' ADDRESS AN D IDENTIFICATION. THE CLAIM OF THE ASSESSEE IS THAT I N THE LAST MONTH OF THE FINANCIAL YEAR, IT IS NOT KNOWN HOW MA NY 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 PROVISION FOR INCURRING THIS EXPENDITURE. FROM THE ORDER OF THE CIT(APPEALS) IT APPEARS THAT APART FROM IDENTIF ICATION AND ADDRESS VERIFICATION, THE ASSESSEE HAS ALSO MAD E PROVISION TOWARDS ICU CHARGES AND LEASE LINE EXPENS ES, ETC. FROM THE ORDER OF THE CIT(APPEALS) IT APPEARS THAT THE ASSESSEE ALSO HAS TO PAY THE VARIOUS OTHER SERVICE PROVIDERS FOR PROVIDING VALUE ADDED SERVICE TO ITS SUBSCRIBERS LIKE DAILY HOROSCOPES, ASTROLOGY, SONGS , WALL PAPER DOWNLOADS, CRICKET SCORES, ETC. ADMITTEDLY, T HE ASSESSEE MADE ARRANGEMENT WITH OTHER SERVICE PROVID ES FOR PROVIDING THESE KIND OF VALUE ADDED SERVICES. T HERE MAY BE JUSTIFICATION WITH REGARD TO THE EXPENDITURE FOR AVAILING THE SERVICES OF IDENTIFICATION AND VERIFIC ATION FOR THE LAST MONTH OF FINANCIAL YEAR, SINCE THE ASSESSE E MAY NOT HAVE THE EXACT DETAILS ON VERIFICATION DONE BY THE CONCERNED PERSONS AND THE AMOUNT REQUIRED TO BE PAI D. HOWEVER, IN RESPECT OF THE DOWNLOADS AND VALUE ADDE D SERVICE, ETC. THE ENTIRE DETAILS MAY BE AVAILABLE I N THE SYSTEM. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDER ED 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 ADDE D SERVICES LIKE DAILY HOROSCOPES, ASTROLOGY, CUSTOMER ACQUISITION FORMS ARE ALL FROM SPECIFIC SERVICE PRO VIDERS AND THESE VALUE ADDED SERVICES ARE MONITORED BY SYSTEM. THEREFORE, EVEN ON THE LAST DAY OF FINANCIAL YEAR, THE ASSESSEE COULD VERY WELL ASCERTAIN THE ACTUAL QUANT IFICATION 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 THE PAYEE MAY NOT B E IDENTIFIED MAY NOT BE JUSTIFIED. THE EXACT FACTS NE ED TO BE EXAMINED. HOWEVER, THIS TRIBUNAL IS OF THE CONSIDER ED OPINION THAT THE MATTER NEEDS TO BE RECONSIDERED BY THE ASSESSING OFFICER. IN OTHER WORDS, THE ASSESSING OF FICER HAS ITA-3215 & 3216/D/2015 9 TO EXAMINE WHETHER THE PAYMENT TO THE PARTY /PAYEE IS IDENTIFIABLE ON THE LAST DAY OF FINANCIAL YEAR AND WHETHER THE QUANTUM PAYABLE BY THE ASSESSEE IS ALSO QUANTIF IED ON THE LAST DATE OF FINANCIAL YEAR. IN CASE, THE ASSES SING OFFICER FINDS THAT THE PAYEE COULD NOT BE IDENTIFIE D ON THE LAST DAY OF FINANCIAL YEAR AND THE AMOUNT PAYABLE A LSO COULD NOT BE ASCERTAINED, THE ASSESSEE MAY NOT REQU IRE TO DEDUCT TAX IN RESPECT OF THAT PROVISION. HOWEVER, I N CASE THE PAYEE IS IDENTIFIED AND QUANTUM IS ALSO ASCERTA INABLE 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 AVA ILABLE ON RECORD, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND THE ISSUE OF YEAR-END PROVISION IS REMITTED BAC K TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICE R SHALL RE- EXAMINE THE ISSUE AFRESH AS INDICATED ABOVE AND THE REAFTER DECIDE THE ISSUE IN ACCORDANCE WITH LAW AFTER GIVIN G REASONABLE OPPORTUNITY TO THE ASSESSEE. (EMPHASIS BY UNDERLINING SUPPLIED BY US) 11. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF BOTH THE SIDES INCLUDING THE DECISIONS RELIED UPON BY THEM. AS PE R THE SCHEME OF CHAPTER XVII-B OF THE INCOME-TAX ACT, 1961, THERE I S A PROVISION FOR DEDUCTION OF TAX AT SOURCE. ORDINARILY, THE DEDUCT ION IS TO BE MADE AT THE TIME OF PAYMENT OR THE CREDIT OF THE AMOUNT TO THE ACCOUNT OF PAYEE. HOWEVER, AS PER PROVISION OF SECTION 194C(2 ), THE TAX IS TO BE DEDUCTED EVEN IF THE AMOUNT IS NOT CREDITED TO THE ACCOUNT OF THE PAYEE BUT TO THE SUSPENSE ACCOUNT. SECTION 194C(2) READS AS UNDER :- 194C(2). WHERE ANY SUM REFERRED TO IN SUB-SECTION (1) IS CREDITED TO ANY ACCOUNT, WHETHER CALLED SUSPENSE ACCOUNT OR BY ANY OTHER NAME, IN THE BOOKS OF ACCO UNT OF THE PERSON LIABLE TO PAY SUCH INCOME, SUCH CREDITIN G SHALL BE DEEMED TO BE CREDIT OF SUCH INCOME TO THE ACCOUN T OF THE PAYEE AND THE PROVISIONS OF THIS SECTION SHALL APPLY ACCORDINGLY. 12. AT THE TIME OF HEARING BEFORE US, LEARNED DR HA S REFERRED TO THE ABOVE SECTION SO AS TO BUTTRESS HIS ARGUMENT THAT T AX IS TO BE DEDUCTED EVEN IF THERE IS PROVISION OF THE AMOUNT PAYABLE. THE ITAT, COCHIN BENCH IN THE CASE OF ABAD BUILDERS (P) LTD. (SUPRA) , AFTER CONSIDERING ITA-3215 & 3216/D/2015 10 THE ABOVE PROVISION, HAS HELD THAT TAX IS TO BE DED UCTED EVEN IN RESPECT OF PROVISION FOR EXPENSES. HOWEVER, THE IT AT, CHENNAI BENCH IN THE CASE OF DISHNET WIRELESS LTD. (SUPRA) HAS HE LD THAT IN THE CASE OF THE YEAR END PROVISION WHERE THE PARTY/PAYEE IS IDE NTIFIABLE, THE TDS IS TO BE DEDUCTED AND WHERE THE PARTY IS NOT IDENTIFIA BLE, NO TDS IS DEDUCTIBLE. SIMILAR VIEW HAS BEEN TAKEN BY THE ITA T MUMBAI BENCH IN THE CASE OF INDUSTRIAL DEVELOPMENT BANK OF INDIA (S UPRA). AFTER CONSIDERING THE SCHEME OF CHAPTER XVII-B WITH REGAR D TO TAX DEDUCTION AT SOURCE, WE AGREE WITH THE VIEWS EXPRESSED BY ITA T MUMBAI BENCH AND ITAT CHENNAI BENCH. AS PER THE SCHEME OF TDS U NDER CHAPTER XVII-B SECTION 199, THE CREDIT FOR THE TDS IS TO BE GIVEN TO THE DEDUCTEE. THUS, THE IDENTIFICATION OF THE PERSON F ROM WHOSE ACCOUNT INCOME TAX WAS DEDUCTED AT SOURCE IS A PRE-REQUISIT E CONDITION SO AS TO MAKE THE PROVISION FOR CHAPTER XVII-B WORKABLE. TA X DEDUCTED AT SOURCE IS CONSIDERED TO BE TAX PAID ON BEHALF OF TH E PERSON FROM WHOSE INCOME THE DEDUCTION WAS MADE AND, THEREFORE, THE C REDIT FOR THE SAME IS TO BE GIVEN TO SUCH PERSON. WHEN THE PAYEE IS NOT IDENTIFIABLE, TO WHOSE ACCOUNT THE CREDIT FOR SUCH TDS IS TO BE GIVEN. SECTION 203(1) LAYS DOWN THAT FOR ALL TAX DEDUCTION S AT SOURCE, THE TAX DEDUCTOR HAS TO FURNISH A CERTIFICATE TO THE PERSON TO WHOSE ACCOUNT SUCH CREDIT IS TO BE GIVEN. THEREFORE, WHEN THE TA X DEDUCTOR CANNOT ASCERTAIN THE PAYEE WHO IS THE BENEFICIARY OF A CRE DIT OF TAX DEDUCTION AT SOURCE, THE MECHANISM OF CHAPTER XVII-B CANNOT B E PUT INTO SERVICE. IN VIEW OF THE ABOVE, WE, RESPECTFULLY AGREEING WIT H THE VIEWS OF ITAT CHENNAI BENCH IN THE CASE OF DISHNET WIRELESS LTD. (SUPRA), SET ASIDE THE ORDERS OF AUTHORITIES BELOW ON THIS POINT AND R ESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR BOTH THE YEAR S UNDER CONSIDERATION. WE DIRECT THE ASSESSING OFFICER TO VERIFY WHETHER T HE PAYEE IS IDENTIFIABLE AND THE AMOUNT PAYABLE TO HIM IS ASCER TAINABLE. THEN THE ASSESSEE WOULD BE REQUIRED TO DEDUCT TAX AT SOURCE IN RESPECT OF SUCH PROVISION. HOWEVER, IN CASE PAYEE IS NOT IDENTIFIA BLE, THE PROVISION OF CHAPTER XVII-B I.E., TAX DEDUCTION AT SOURCE, CANNO T BE PRESSED INTO ITA-3215 & 3216/D/2015 11 SERVICE AND, THEREFORE, THE ASSESSEE IS NOT REQUIRE D TO DEDUCT TAX AT SOURCE IN SUCH A CASE. THE ASSESSING OFFICER WILL READJUDICATE THE ISSUE AFRESH AFTER EXAMINING THE ABOVE FACTS. NEEDLESS T O MENTION THAT HE WILL ALLOW ADEQUATE OPPORTUNITY OF BEING HEARD TO T HE ASSESSEE WHILE GIVING EFFECT TO OUR ORDER. 13. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE TREATED TO BE ALLOWED FOR STATISTICAL PURPOSES. DECISION PRONOUNCED IN THE OPEN COURT ON 10.01.2017 . SD/- SD/- (CHANDRA MOHAN GARG (CHANDRA MOHAN GARG (CHANDRA MOHAN GARG (CHANDRA MOHAN GARG ) )) ) ( (( ( G.D. AGR G.D. AGR G.D. AGR G.D. AGR AWAL AWAL AWAL AWAL ) )) ) JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VK. COPY FORWARDED TO: - 1. APPELLANT : M/S APOLLO TYRES LIMITED, M/S APOLLO TYRES LIMITED, M/S APOLLO TYRES LIMITED, M/S APOLLO TYRES LIMITED, PLOT NO.7, INSTITUTIONAL AREA, PLOT NO.7, INSTITUTIONAL AREA, PLOT NO.7, INSTITUTIONAL AREA, PLOT NO.7, INSTITUTIONAL AREA, SECTOR SECTOR SECTOR SECTOR- -- -32, GURGAON, HARYANA. 32, GURGAON, HARYANA. 32, GURGAON, HARYANA. 32, GURGAON, HARYANA. 2. RESPONDENT : DEPUTY COMMISSIONER OF INCOME TAX, DEPUTY COMMISSIONER OF INCOME TAX, DEPUTY COMMISSIONER OF INCOME TAX, DEPUTY COMMISSIONER OF INCOME TAX, TDS CIRCLE, GURGAON. TDS CIRCLE, GURGAON. TDS CIRCLE, GURGAON. TDS CIRCLE, GURGAON. 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR