DCIT Vs Tata Communications Transformation Services Limited (ITAT Mumbai)
Conclusion: Disallowance under section 40(a)(ia) and liability under section 201 operated independently, and assessee could not escape TDS liability merely by making a partial disallowance in its return. However, since assessee was not given an opportunity to establish that conditions under the proviso to section 201(1) were met, the matter was remanded to AO for fresh verification and adjudication in accordance with law.
Held: Assessee made year-end provisions of ₹90.89 crore for expenses in F.Y. 2017-18 without deducting tax at source, but suo motu disallowed 30% of the same under section 40(a)(ia) while filing its return of income. AO held the assessee to be an “assessee in default” under section 201(1) and levied interest under section 201(1A). AO raised a total demand of ₹2,58,38,567, which included the TDS default amount and interest under Section 201(1A). CIT(A), relying on Pfizer Ltd. v. ITO (TDS) [ITA No. 1667/Mum/2010], deleted the demand holding that once disallowance was made under section 40(a)(ia), the same amount could not again be subjected to TDS liability under section 201. It was held that liability under section 201 was independent of the disallowance made under section 40(a)(ia). The fact that the assessee voluntarily disallowed 30% of the expenses under section 40(a)(ia) did not automatically absolve it from TDS liability under section 201(1). The benefit of non-treatment as “assessee in default” could be availed only if the conditions prescribed in the first proviso to section 201(1)—viz., the deductee had filed return, offered income, paid due tax, and the assessee furnishes Form 26A—were satisfied. Since assessee failed to demonstrate compliance with the said conditions, the matter was remanded to the AO to afford an opportunity to assessee to furnish necessary evidence and to re-adjudicate the issue. Tribunal restored the matter to the file of the AO and granted assessee an opportunity to prove the fulfillment of the conditions.
