No TDS obligation for general credit entry & so no s. 40(a)(i) disallowance.
Even if TDS applicable, no s. 201 TDS liability if s. 40(a)(i) disallowance made
The assessee made a provision
for Rs. 10 crores in respect of payment due to various parties but did
not deduct TDS thereon. The provision was made without making specific
entries into the accounts of the parties. The assessee disallowed the
expenditure in respect of the said provision u/s 40(a)(i) &
40(a)(ia). Next year the entire provision of expenses was written back
and the actual amounts paid to the respective parties were credited to
their respective accounts after deducting TDS. The AO held that despite
such
disallowance, the assessee was liable u/s 201 as an
assessee-in-default for failure to deduct TDS. On appeal by the
assessee, HELD by the Tribunal:
(i) As the provision was made
without making specific entries into the accounts of the parties and the
payee was not identifiable, the TDS provisions are not applicable. The
whole scheme of TDS proceeds on the assumption that the person whose
liability is to pay an income knows the identity of the beneficiary or
the recipient of the income. The TDS mechanism cannot be put into
practice until identity of the person in whose hands it is includible as
income can be ascertained (IDBI vs. ITO 107 ITD 45(Mum) followed);
(ii) Once the amount has been
disallowed u/s 40(a)(i) for non-deduction of tax, it cannot be subject
to TDS provisions again so as to make the assessee liable to pay the tax
u/s 201 & interest u/s 201(1A). If the AO’s view was accepted that
the assessee was liable to pay the TDS not deducted, then a disallowance
u/s 40(a)(i) and 40(a)(ia) cannot be made and those provisions may
become otiose.
No comments:
Post a Comment