In a partial relief to Volvo India Pvt. Ltd., the Karnataka High Court remand the matter back to Authority as disallowance of deduction expenditure not appreciated by Income Tax Appellate Tribunal (ITAT).
The assessee, Volvo India Pvt. Ltd is engaged in the business of manufacturing/dealing in tractors, trailers, bus chassis, road machinery and trading in construction equipment and also provides software, product design and other support services. The assessee created provisions of expenses, head wise, on adhoc basis in respect of various services received to facilitate closing of the books without reference to any particular party. Such excess amounts of provisions created got reversed subsequently.
No tax deduction at source was made in respect of such provisions. The Income Tax Officer after noticing the said provisions disallowed by the appellant itself to be deducted from the expenditure while calculating for the purpose of taxation, which reflected in the statement of “Computation of Total Income Tax Liability as at 31st March 2012”, initiated proceedings under Section 201(1) or 201(1A) of the Act considering the appellant to be an assessee in default in respect of the amount of tax which was not deducted at source on such provisions. Being aggrieved by the same, the assessee preferred appeals before the Commissioner of Income Tax (Appeals), Bangalore which came to be dismissed for both the assessment years under consideration.
The coram of Justice S. Sujatha and Justice V.Shrishananda in the light of the judgment of the Apex Court in the case of Shree Choudhary Transport Company would not be of any assistance to the Revenue unless the material aspects are considered with respect to Section 40(a)(ia) of the Act read with Sections 194C, 194H, 194I, 194J – relevant Sections under which TDS was required to be deducted by the assessee. These factors necessarily need to be addressed by the Tribunal keeping in mind the provisions of the Act as well as the legal principles enunciated by the Hon’ble Courts. If the deduction is not claimed for the expenditures made in the provision even in the return submitted and the same is offered to tax in the subsequent year after reversing the entries pursuant to the receipt of the bills/invoices by the payees, the matter has to be analysed having regard to, whether income has accrued to the payees to deduct tax at source.
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