Dentsu Webchutney Pvt. Ltd, Gurgaon V. ACIT, Spl. Range-3, New Delhi

ITA 3285/DEL/2019

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 2822 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-06-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2015-2016
• Appeal Filed On: 15-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; TDS
• Section: 40(a)(ia)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘B’, NEW DELHI Before Dr. B. R. R. Kumar, Accountant Member Shri Yogesh Kumar US, Judicial Member ITA No. 3285/Del/2019 : Asstt. Year : 2015-16 Dentsu Webchutney Pvt. Ltd, Building No. 5A, DLF Cyber City, Phase-2, Gurgaon, Haryana Vs ACIT, Special Range-3, New Delhi (APPELLANT) (RESPONDENT) PAN No. AAACW4135B Revenue by : Sh. Satish Aggarwal, CA Assessee by : Sh. Sanjay Kumar, Sr. DR Date of Hearing: 17.05.2022 Date of Pronouncement: 27.06.2022 ORDER Per Dr. B. R. R. Kumar, Accountant Member: The present appeal has been filed by the Assessee against the order of the ld. CIT(A)-34, New Delhi dated 13.02.2019. 2. The Assessee has raised the following grounds of appeal: “3. That the learned Commissioner of Income Tax, (Appeals) has grossly erred in confirming the addition of Rs. 1,99,08,188/- without appreciating the fact that the amount of expenditure clubbed under the head provisions was incurred by the Assessee during the year under assessment and the same was an ascertained liability.” 3. The brief facts of the case are that the assessee company was engaged in the business of creative media and digital solution for internet and mobile advertisers. The AO completed the assessment vide order dated 15.11.2017 after making 2 disallowance of Rs.2,58,58,258/- on account of unascertained liability. 4. The relevant part of the order of the ld. CIT(A) is as under: “5.3 During the course of appellate proceedings, appellant has submitted that AO has disallowed the amount of Rs. 92,18,552/- incurred under general heads like staff incentive, rent, audit fees, electricity etc. by treating them as unascertained liability. It is submitted by the appellant that out of the total expenditure of Rs. 92,18,552/-, TDS was not deducted during the year under appeal on Rs. 65,23,345/-. The appellant has suo moto disallowed 30% of Rs.65,23,345/- i.e. Rs. 19,57,002/- u/s 40(a)(ia) due to non deduction of TDS. As regards design and development expenses appellant has submitted that the term provision was used by the appellant company to indicate the ascertained liability/expenditure under the head design and development against which income had also been declared/accounted in books of accounts during the year itself. The appellant has furnished supporting bills and vouchers in respect of provisions as additional evidences during the appellate proceedings. Remand report under Rule 46A is called for from the AO. AO has raised the objection on admitting additional evidences under Rule 45A. In rejoinder appellant has requested to admit additional evidences as which, goes to the root of the case. In support of its contention, appellant has enclosed copies of the bills raised by the vendors for which provision was made. The appellant has further submitted that it had provided for liability for expenses either on the basis of the bills received before the closure of the books of account or on the basis of the purchase orders for services availed during the year. It had an accounting policy of reversing in the subsequent assessment year the provision for such expenses. It is submitted by the appellant that there is excess provision of expenses of Rs. 5.48 lacs in the year under 3 appeal and as per the companies policy appellant company has reversed the total provision as created in the AY under appeal in the next FY which has resulted in less claim of expenditure by the similar amount of Rs.5.48 lacs. Further, appellant has submitted that on design and development expenses appellant has suo moto disallowed 30% of said expenses at Rs.54,20,070/- while filing the return of income therefore addition should be restricted to the extent of Rs. 1,26,46,830/-. Further appellant has stated that AO has made double addition on account of tour and travelling and audit expenses at Rs,^ 1,30,000/- and Rs. 4 lacs respectively. Hence total disallowance worked out to Rs. 1,99,08,168/- in place of Rs. 2,58,58,258/-. 5.4 I have considered the facts of the case, finding of the AO and submission of the appellant. The appellant has made provisions of expenses at Rs. 92,18,552/- out of which appellant has suo moto disallowed 30% of Rs. 65,23,345/- as appellant failed to deduct TDS on the provisions of expenses which are liable for deduction of TDS and added Rs. 19,57,002/- in its computation of income u/s 40(a)(ia). Remaining provisions are in such a nature on which TDS is not required to be deducted they are related to wages, petrol expenses, staff welfare, electricity, telephone expenses etc. The appellant has filed detail of provisions and it is observed that actual bill was submitted for the expenses in the next financial year and the appellant has admitted that it has reversed all the provisions in subsequent assessment year. So all the provisions made by the appellant are outstanding as on 31st March of the Financial Year of the relevant Financial Year and reversed on the 1st day of the next Financial Year. Hence, they are the provisions and not allowable in the year under consideration being contingent and unascertained liability as liability actually related to these expenses crystallized during the next year when actual bill was raised related to these expenses. Since appellant has itself added 30% of expense of Rs. 65,23,342/- therefore balance addition related to 4 provision for expenses Rs.72,61,550/- (Rs. 92,18,552 - Rs. 19,57,002/-) is hereby confirmed. 5.5 As regards design and development expenses of Rs. 1,80,66,708/-, the appellant has disallowed 30% of these expenses at Rs. 54,20,070/- u/s 40(a)(ia) on account of non deduction of TDS. The appellant has made provisions for design and development expenses on the basis of the various bills raised by different parties, but appellant has not treated them as final expenses and kept those expenses under the head provisional expenses and as per the accounting policy of the company appellant has reversed these expenses in subsequent assessment year. Thus, expenses are provisional in nature being contingent and unascertained as appellant has finally booked the expenses on the basis of actual bill raised by the parties and excess provision if any, will be reversed in the subsequent year. Being provisional in nature, appellant has not deducted any TDS on these expenses and disallowed 30% of these expenses in the computation of the income. Hence, AO has correctly made the addition on account of provisional expenses debited under the head design and development expenses, thus addition made by the AO is confirmed to the extent of Rs. 1,26,46,638/- (Rs. 1,80,66,708 - Rs.54,20,070/-). Thus addition made by the AO is sustained to the extent of Rs. 1,99,08,188/- and balance addition of Rs.59,50,070/- is hereby deleted as appellant has already added the same in the computation of income.” 5. Heard the arguments of both the parties and perused the material available on record. 6. The only dispute before us is whether the amounts incurred and claimed as expenditure pertaining to the instant year are “contingent in nature” and “provisional” or ”unascertained” “incurred in reality” for the business of the current year. Since 5 there is absolute deficiency of facts on record with regard to actual incurring of expenditure, this issue needs to be examined by the Assessing Officer after going through the entire books of accounts, reversal of entries along with the bills & vouchers. Hence, in the interest of justice, we set aside the matter to the file of the AO to examine the audited books of accounts and take decision accordingly after providing an opportunity of being heard to the assessee. The assessee shall comply with the notices issued by the Assessing Officer in production of records. 7. In the result, the appeal of the assessee is allowed for statistical purpose. Order Pronounced in the Open Court on 27/06/2022. Sd/- Sd/- (Yogesh Kumar US) (Dr. B. R. R. Kumar) Judicial Member Accountant Member Dated: 27/06/2022 *Subodh Kumar, Sr. PS* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR