VIACOM 18 MEDIA PVT. LTD,MUMBAI V. DCIT(TDS)-2(3), MUMBAI, MUMBAI

CO 92/MUM/2025

AI Insights

The case revolves around the dispute concerning the non-deduction of TDS by Viacom 18 Media Pvt. Ltd. on year-end provisions made in its books for the Assessment Year 2018-19. The AO had treated the company as an 'assessee in default' under sections 201(1) and 201(1A) of the Income Tax Act for not deducting TDS on payments amounting to Rs. 7,19,84,31,935. The CIT(A) reversed the AO's decision, leading to the revenue's appeal. The Tribunal's decision affirmed the CIT(A)'s ruling, emphasizing that the provisions were made on an estimated basis and were not credited to specific accounts of the payees at the time of provision.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 775929 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 17 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 09-09-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2018-2019
• Appeal Filed On: 23-04-2025
• Other Referred Cases: ACIT V/s Motor Industries Co, Karnataka Power Transmission Corporation Limited V/s DCIT(TDS), Industrial Development Bank Of India V/s ITO, M/s Apax Partner Put Ita V/s DCIT, Aditya Birla Nava Limited v/s DCIT, Mahindra and Mahindra Limited, Telco Construction Equipment Co ltd
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VIVEK PERAMPURNA; DR
• Assessee Lawyers: NIMESH VORA MOKSHA MEHTA; ARS
• Keywords: TDS; Non-deduction of tax
• Section: 145; 201(1); 40(a)(ia); 194C

Judgement Text

" | | | | आयकर अपीलीय अिधकरण ा यपीठ, मुंबई | | | | IN THE INCOME TAX APPELLATE TRIBUNAL “F” BENCH, MUMBAI BEFORE SHRI NARENDRA KUMAR BILLAIYA, HON’BLE ACCOUNTANT MEMBER & SHRI ANIKESH BANERJEE, HON’BLE JUDICIAL MEMBER I.T.A. No. 961/Mum/2025 Assessment Year: 2018-19 DCIT(TDS)-2(3), Mumbai Vs Viacom 18 Media Pvt. Ltd. Zion BIZ World Subhash Road Ville Parle (East) Mumbai - 400057 [PAN: AAACM9164E] अपीला थ\u0016/ (Appellant) \u0017\u0018 यथ\u0016/ (Respondent) C.O. No. 92/Mum/2025 Assessment Year: 2018-19 Viacom 18 Media Pvt. Ltd. Zion BIZ World Subhash Road Ville Parle (East) Mumbai - 400057 [PAN: AAACM9164E] Vs DCIT(TDS)-2(3), Mumbai अपीला थ\u0016/ (Appellant) \u0017\u0018 यथ\u0016/ (Respondent) Assessee by : Shri Nimesh Vora/Ms. Moksha Mehta, A/Rs Revenue by : Shri Vivek Perampurna, CIT D/R सुनवाई की तारीख/Date of Hearing : 03/09/2025 घोषणा की तारीख /Date of Pronouncement : 09/09/2025 आदेश/O R D E R PER NARENDRA KUMAR BILLAIYA, AM: I.T.A. No. 961/Mum/2025 and C.O. No. 92/Mum/2025 are appeal by the revenue and cross-objection by the assessee preferred against the very same order dated 18/12/2024 by the NFAC, Delhi [hereinafter “the ld. CIT(A)”] pertaining to AY 2018-19. 2. The grievance of the revenue reads as under:- Printed from counselvise.com I.T.A. No. 961/Mum/2025 C.O. No. 92/Mum/2025 2 “1. The Ld. CIT(A) has not appreciated the fact that, in the instant case, the liability was ascertained and accounted by the assessee in its books of account, thus the assessee company should have made TDS on these amounts payable, even though the company has not received final invoices from the related parties. 2. The Ld. CIT(A) has erred in deciding that the assessee is not an assessee-in-default, without appreciating the fact that, provision of section 40(a)(ia) of the Act is very clear that wherever there is default in payment of TDS on any amount where TDS is applicable, 30% of such amount will not be allowable as expenses in computing the income of the assessee. Further, the provisions of section 40(a)(ia) does not negate the liability to deposit the TDS once the disallowance has been made. In the instant case, the assessee itself has accepted the default and made the disallowance and the Auditor has reported the same in Tax Audit report also.” 3. During the course of proceedings u/s 201(1)/201(1A) of the Act, the AO observed from Form 3CD report of the assessee that the assessee company has made payments of Rs. 7,19,84,31,935/- on account of various expenses on which tax at source was deductible under the TDS provisions of various Sections of the Act. But the assessee did not deduct the tax at source. The assessee company was asked to explain why it should not be treated as an assessee in default u/s 201(1)/201(1A) of the Act for non-deduction of tax at source on the payments related to Sections 194C, 194J and 194I of the Act. The assessee explained as under:- “The company follows mercantile system of accounting and therefore in accordance with accounting standard it had made general provision for expenses at the year end further the exact amount payable to the service provider was not known as on the last day of the previous year ending 31.3.2018 and hence a provision was made in its book of account on a fair estimation basis. The reason for the same is that there are cost which are visible in foresight but cannot be quantified with precision. In other words although the factum of liability is ascertained its quantum remains unknown. In such case, general accounting principle mandate, \"a provision\" for expenses. Such as exercise is an acknowledgement of the present liability, based on past experience. For deduction of tax at source, the identity of the payee must be known as well as the quantum of payment must also be ascertainable, at the point of time when such general provision is made. If one of the aforesaid item is not available then no tax can be deducted at source. At the time of finalizing the financial statement as at 31.03.2018, the company had not received invoices from all the vendors or the quantum of payment was not ascertainable. These being merely provision and since the amount was not ascertained, no tax was deducted at source on the same. The details of provision made during the Printed from counselvise.com I.T.A. No. 961/Mum/2025 C.O. No. 92/Mum/2025 3 year other than the amount of provision on amount payable to Non residents as on 31.03.2018 on which tax was not deducted at source are as follows. Section Amount in INR Domestic Payments 194C 4,36,41,28,046 194H 6,80,000 1941 3,45,55,372 194J 2,79,90,68,517 Grand Total 7,19,84,31,935 The above mentioned provision were added back to business profits in the computation of income of the company for a.y 2018-19 as per the provision of section 40(a)(ia) of the Act. Subsequently when the actual invoices were received by the company, the company had deducted and deposited tax to the credit of Government treasury in subsequent years. The provision of the Act casts an obligation on the payer to deduct taxes at the time of credit of such sum to the account of the payee or at the time of payment, whichever is earlier. Further at the time of making provision in the books of account, since the amount payable to the service provider was not actually quantifiable, the Company made a provision in its books on a fair estimation basis. In view of the above, the Company believes that tax is not required to be deducted at source from the amounts credited to the provision account considering the following reason and relied on various case laws. * reversal of provision in the next Financial Year * No constructive credit accrual of income in the hands of the payee under section 4 of the I.T Act Relied on Decision * ACIT V/s Motor Industries Co (2001} 249ITR 141 ( Karnataka High Court) *Karataka power Transmission Corporation Limited V/s DCIT(TDS) (ITA.No 750 758 759 of 2009) (Karnataka High Court) *Industrial Devolopment Bank Of India V/s ITO (2007) 107 ITD 45 (Mumbai Tribunal ) * M/s Apax Partner Put Ita V/s DCIT (2017) ITA No 628 / Mum/ 2013(Mumbai Tribunal ) * Aditya Birla Nava Limited v/s DCIT(2014) ITA No 8427 / Mum/2010 Mumbai Tribunal) * Mahindra and Mahindra Limited (ITA No 8597/ Mum/ 2010) Mumbai tribunal * Telco Construction Equipment Co ltd ( ITA No 478/ Bang/ 2012) Banglore Tribunal In view of the above it is submitted that creation of a right to receive the sum in favour of payee is a pre-requisite for trigger of TDS provision. Mere recognition of a provision as per the accounting norms, of an estimated provision in the books of account would not trigger the applicability of TDS provision as the payee's right to receive is inchoate and has not accrued into income which has become due and payable.\" Printed from counselvise.com I.T.A. No. 961/Mum/2025 C.O. No. 92/Mum/2025 4 4. The aforestated submissions of the assessee did not find any favour with the AO for the following reasons:- “The submissions of the assessee, have been duly considered and perused but not found to be acceptable due to the following reasons; i. As per Audit report in Form No. 3CD column 21(b) the total amount of expenses claimed Rs. 7,19,84,31,935/- has been incurred and are in nature of domestic expenses on which tax is not deducted u/s. 194C, 194J, 1941 of the Income Tax Act 1961. ii. Perusal of the Audit report in form 3CD, column No 21(b) revealed that quantum payables under relevant section of TDS as per the IT Act are clearly identified and exact amount payable to them is also ascertained. This shows that the liabilities have been crystallized and payees were identified. Hence, there is no dispute that TDS should have been made on the expenses payable when payees are identified and amount credited to their accounts were ascertained. Sr No Nature of payment covered under section Amount (in Rs) 1 194C 4,36,41,28,046 2 194H 6,80,000 3 194I 3,45,55,372 4 194J 2,79,90,68,517 Total 7,19,84,31,935 iii. Tax deduction at source liability is a vicarious liability to pay tax on behalf of the person who is to be beneficiary of the payment or credit, with a corresponding right to recover such tax payable from the person to whom credit is afforded or payment is made. Thus, the whole scheme of tax deduction at source proceeds on the assumption that the person whose liability is to pay an amount knows the identity of the beneficiary or the recipient of the income. It is a sine qua non for a vicarious tax deduction liability that there has to be a principal tax liability in respect of the relevant income first, and a principal tax liability can come into existence when it can be ascertained as to who will receive or earn that income because the tax is on the income and in the hands of the person who earns that income. Therefore, tax deduction at source mechanism can be put into practice when identity of the person in whose hands it is includible as income can be ascertained. In this case, the assessee company has already ascertained the amounts and identified the payees and thus the assessee company should have made TDS on these amounts payable. iv. The provision of section 40(a)(ia) of the Act is very clear wherein it has been mentioned that wherever there is default in payment of TDS on any amount where TDS is applicable, 30%of such amount will not be allowable as expenses in computing the income of the assessee. In your case, you have defaulted in deduction of TDS on Rs 7,19,84,31,935/-which has been claimed as expenses during the year u/s 30 to 38 of the IT Act and thus the assessee has defaulted the TDS provision. This default on assessee part makes the company “ assessee in default” v. Various decisions relied by the assessee company arguing that disallowance has been made under section 40(a) (ia) of the IT Act in the computation of income is irrelevant as the assessee company has disallowed only 30% of the amounts on which Printed from counselvise.com I.T.A. No. 961/Mum/2025 C.O. No. 92/Mum/2025 5 TDS was not made and 70% of the amounts have been claimed as expenditure. Judicial decisions relied by the assessee in this regard are to be seen in the context of 100% disallowance existed under section 40(a)(ia) of the IT Act during the AY 2014-15 and before. Hence, this argument is not valid for the AY 2018-19 which is under consideration. 5. Therefore, in view of the above mentioned facts and reasons, the assessee company is liable to deduct TDS on 7,19,84,31,935 of domestic expenses and the assessee is held to be in default within the meaning of Section 201(1) for not effecting TDS under section 194J, 194C, 194H and 1941 on the amount of Rs. 7,19,84,31,935 /-. Further, the assessee is liable to pay the interest u/s 201 (IA) for the defaults committed by the assessee. The amount payable by the assessee on this ground is computed as follows: TDS has not deducted u/s Amount on which TDS has not been deducted Amount of TDS default committed Interest on late payment between April 2017 to March, 2019 [24 month] Total Default of TDS * Interest Domestic Payments (A) (B) (C) (D) - (B) + (C) 194C 4,36,41,28,046 8,72,82,561 2,09,47,815 10,82,30,376 194H 6,80,000 34,000 8,160 42,160 1941 3,45,55,372 34,55,538 8,29,330 42,84,868 194J 2,79,90,68,517 27,99,06,851 6,71,77,645 34,70,84,496 Total 7,19,84,31,935 37,06,78,950 8,89,62,950 45,96,41,900 6. In view of the above, the Assessee Company is directed to pay the above default amount of Rs.45,96,41,900/- [37,06,78,950 + 8,89,62,950] mentioned at the earliest.” 5. Aggrieved by the findings of the AO, the assessee preferred an appeal before the ld. CIT(A) and reiterated its claim of non-deduction of tax at source for the reasons given hereinabove. After considering the facts and the submissions and drawing support from the various decisions mentioned by the ld. CIT(A) at para 5.18 of his order, the ld. CIT(A) held that in a case where payee is not identifiable, the provisions of Chapter XVII-B of the Act cannot be invoked. The ld. CIT(A) further observed that in the absence of an ascertainable amount and identifiable payee, the machinery provisions of recovering TDS does not come into operation because it does not aid the charge of tax u/s 4 of the Act but Printed from counselvise.com I.T.A. No. 961/Mum/2025 C.O. No. 92/Mum/2025 6 takes a form of separate levy, independent of other provisions of the Act. The ld. CIT(A) further observed that the AO has considered the amount of provisions as ascertainable liability on the premise that they have been disclosed in the tax audit report by the assessee. However, the AO has failed to understand that it is never disputed that the amounts have been accounted as provision made on estimated basis and credited to a separate account i.e. “Accrual General - Expenses”. Hence the individual parties/vendors were not credited at the time of creating the provision. The disclosure made in the tax audit report was done to comply with the requirements of the tax audit which requires the auditor to disclose the amounts of expenses including the provision created for such expenses in relation to which no TDS has been deducted. The ld. CIT(A) accordingly deleted the impugned addition. 6. The representatives were heard at length. Case records carefully perused. 7. The business profile of the assessee is that it is into the media industry and is engaged in program production, movie production, distribution and marketing, Over the Top (OTT) platform and conducting live events where, as a business practice, there are no standard rates for services procured from various vendors. Most of his services which the assessee company engages in like television program or movie production are continuous service where costs for shooting additional sequences or weekend programs are paid only on actual basis. Such costs are finalized and accounted only on receipt of invoices and hence it is challenging to quantify the amount for such period until and unless invoices are received from vendor. Similarly, in case of marketing activities, where ad-agencies are involved to market the program/movie Printed from counselvise.com I.T.A. No. 961/Mum/2025 C.O. No. 92/Mum/2025 7 on various platforms such as print, TV, radio. The agencies in turn allocate and finalize the cost with these platforms and post receiving invoices from these platforms. It raises invoices on advertisers. The invoices and actual cost for such advertisement expenses which are incurred in February and March is confirmed when assessee receives invoices subsequently from ad-agency. 7.1. The entire quarrel revolves around the question as to whether on accounting for the year-end provisions, is there any liability credited by the assessee company towards any specific, identifiable person/party/vendor to attract provisions of Chapter XVII-B of the Act. In simple words, is there any income which can be said to be attributable to the payee when provisions is being made at the end of the year. Keeping in mind the above factual position of the business of the assessee the undisputed facts of the case can be summarized as under:- “1. The Appellant has made provisions for expenses at the end of the year. i.e., March 2018. 2. On such year-end provisions made by the Appellant, there is no TDS deducted by the Appellant. 3. Such year-end provisions were not credited to any specific person / party / vendor but the credit was made to \"Accrual General - Expenses\" in its books of accounts. 4. Such provisions made at the year-end are reversed immediately in next year i.e. on 01.04.2018 5. The Appellant has also made a disallowance (30% of such provisions made) u/S 40(a)(ia) of the Act for non-deduction of TDS from such year-end provisions. 6. The TDS officer is of the view that TDS has to be deducted on such year-end provisions. 7. Such year-end provisions are on estimated basis and are booked by the Appellant following the mandatory accounting standards for casting its financial statements and are eventually reversed in the subsequent year when the Appellant receives the actual invoice for the vendors) / parties. Printed from counselvise.com I.T.A. No. 961/Mum/2025 C.O. No. 92/Mum/2025 8 8. On receipt of such actual invoices and identification of parties in subsequent year, TDS is deducted and paid by the Appellant on such actual invoices.” 8. The sample data entries in the books of the assessee can be understood from the following charts:- Printed from counselvise.com I.T.A. No. 961/Mum/2025 C.O. No. 92/Mum/2025 9 Printed from counselvise.com I.T.A. No. 961/Mum/2025 C.O. No. 92/Mum/2025 10 Printed from counselvise.com I.T.A. No. 961/Mum/2025 C.O. No. 92/Mum/2025 11 Printed from counselvise.com I.T.A. No. 961/Mum/2025 C.O. No. 92/Mum/2025 12 9. Similar accounting entries are also made for marketing and advertisement expenses. It can be seen from the above sample entries against the estimate provisions, actual invoice booking in AY 2018-19 relevant to AY 2019-20 on which TDS was deducted. Therefore, the assessee cannot be treated as assessee in default for the year under consideration. The year-end provisions can further be understood from the following chart:- Printed from counselvise.com I.T.A. No. 961/Mum/2025 C.O. No. 92/Mum/2025 13 Particulars Rs (in crores) Provisions against which invoices were booked in FY 2017-18 (AY 2018-) and TDS is deducted and paid at the time of booking of invoices 289.40 Provisions reversed immediately in the FY 2018-19 (AY 2019- 20) and since, no invoices booked against the provision, there is no question of TDS 404.59 Advance payment on which TDS was already deducted 25.85 Total year end provisions appearing in Tax Audit report 719.84 10. A conspectus understanding of the facts that the various sample entries with the year-end provisions are estimated on the basis of contract with the vendors, summary of services performed/partly performed till year-end for which no invoices have been raised. Such provision entry is merely for the purpose of accruing the relevant expenditure as required by the accounting standards and are for the purpose of compliance with the provisions of Section 145 of the Act. This provisions are immediately reversed on first day of next accounting year and it is clear from the reversal entry that the individual parties/vendors were not credited at the time of making provisions but the credit was made to “Accrual General – Expenses” and reversed on the first day of the next financial year. Thus, showing that the amount payable to individual vendor has not crystallized. 11. Considering the facts in totality, we do not find any error or infirmity in the findings of the ld. CIT(A). Accordingly, the effective Printed from counselvise.com I.T.A. No. 961/Mum/2025 C.O. No. 92/Mum/2025 14 ground/s raised by the revenue are dismissed and the cross- examination by the assessee becomes infructuous. 12. In the result, appeal of the revenue and cross-objection by the assessee are dismissed. Order pronounced in the Court on 9th September, 2025 at Mumbai. Sd/- Sd/- (ANIKESH BANERJEE) (NARENDRA KUMAR BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated 09/09/2025 *SC SrPs *SC SrPs *SC SrPs *SC SrPs आदेश की \u0015ितिलिप अ\u001aेिषत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. \u0015 थ / The Respondent 3. संबंिधत आयकर आयु\" / Concerned Pr. CIT 4. आयकर आयु\" ) अपील ( / The CIT(A)- 5. िवभागीय \u0015ितिनिध ,आयकर अपीलीय अिधकरण, मुंबई /DR,ITAT, Mumbai, 6. गाड& फाई/ Guard file. आदेशानुसार/ BY ORDER TRUE COPY Assistant Registrar आयकर अपीलीय अिधकरण ITAT, Mumbai Printed from counselvise.com "