DCIT Vs Tata Communications Transformation Services Limited (ITAT Mumbai)
Summary: The Mumbai Bench of the Income Tax Appellate Tribunal considered the Revenue’s appeal concerning treatment of Tata Communications Transformation Services Limited as an “assessee in default” under section 201(1) and levy of interest under section 201(1A) for non-deduction of TDS on year-end expense provisions aggregating to Rs. 90,89,52,854/- for AY 2018-19. The assessee had suo-moto disallowed 30% of the expenditure, amounting to Rs. 27,26,85,856/-, under section 40(a)(ia). The Assessing Officer nevertheless treated the assessee as an assessee in default and determined tax and interest liability of Rs. 2,58,38,567/-. The CIT(A), relying upon Pfizer Limited vs. ITO (TDS), deleted the demand.
Before the Tribunal, the Revenue contended that the expenditure had been credited in the books, the liability had crystallised and TDS became applicable on credit or payment, whichever was earlier. It relied upon Inter Globe Aviation Ltd. vs. ACIT and Biocon Ltd. vs. DCIT LTU, Bangalore. The Revenue also argued that the assessee’s own disallowance under section 40(a)(ia) implicitly recognised the applicability of TDS provisions. The assessee, however, submitted that the year-end provisions were merely ad-hoc estimates made without receipt of invoices and without contractual liability to identified vendors at that stage. It stated that out of the total provision of Rs. 90,89,52,854/-, TDS compliance was subsequently made on Rs. 76,31,57,103/- when invoices were received, Rs. 13,83,21,655/- was reversed because no invoices were received, and Rs. 74,74,095/- represented material purchases, reimbursements, below-threshold items, etc., not subject to TDS. Reliance was placed upon PCIT vs. Sanghi Infrastructure Ltd. and Pfizer Limited.
