DCIT Vs Pfizer Limited (ITAT Mumbai)
ITAT Mumbai Rejects TDS Liability on Estimated Year-End Expense Provisions; 4. Year-End Expense Provisions Not TDS Trigger Without Identified Payees: ITAT Mumbai
Summary: The Revenue challenged the order dated 09.01.2026 of the learned JCIT(A) for AY 2019-20, which deleted a demand raised under sections 201(1) and 201(1A) of the Income-tax Act, 1961 for alleged non-deduction of TDS on year-end provisions for various expenses.
Pfizer Limited had created year-end provisions aggregating to Rs.50,49,86,000/- towards expenses including commission or brokerage, rent, contractor payments and fees for technical services. The provisions were created without deduction of tax, and the tax auditor reported the non-deduction in Form No. 3CD. The assessee nevertheless disallowed 30% of the corresponding expenditure under section 40(a)(ia).
The Assessing Officer subsequently treated the assessee as an assessee in default and raised a demand of Rs.2,22,15,118/- under section 201(1), together with interest of Rs.22,21,511/- under section 201(1A), aggregating to Rs.2,44,36,629/-. The assessee contended that the provisions were merely estimated accounting entries. Invoices had not been received, the precise liabilities were not crystallised and, in several cases, the payees were not identifiable. The provisions were reversed at the beginning of the succeeding year, after which actual invoices were accounted for in the names of the respective vendors and TDS was deducted wherever applicable.
