Cognizant Technology Solutions India Private Limited Vs DCIT (ITAT Chennai)
ITAT Chennai held that liability to deduct Tax Deduction at Source [TDS] arise only on the amount of actual payment and not on the provision made. Accordingly, TDS liability reduced to that extent and appeal partly allowed.
Facts- Post survey, AO found non-deduction of TDS on certain expenses as on 31.03.2015. AO was of the opinion that no TDS was deducted on total amount of expenditure of ₹.27,87,89,271/-. The assessee explained that out of said amount, only ₹.14,36,15,237/- is subjected to TDS subsequently and no TDS is liable to be deducted on remaining amount. Further, the assessee contended that no income accrued to the vendors at the time of creation of provision and withholding tax provisions are not applicable. The assessee further contended that the assessee cannot be deemed to be an “assessee in default” and requested AO to drop the proceedings.
AO did not accept the submissions of the assessee and proceeded to raise demand payable an amount of ₹.54,96,514/- under section 201 & 201(1A) of the Act. CIT(A) confirmed the same.
Conclusion-Held that in the present case, the provision of ₹.1,97,15,000/- was made as on 31.03.2015 and actual payment was made to an extent of ₹.1,18,63,000/-. Therefore, the liability to deduct TDS shall be on the amount of actual payment only. In this scenario, by following the order of Bangalore Tribunal in the case of Biocon Ltd. v. DCIT (supra), we hold tax liability upon the recipient will be on the amount to extent of ₹.1,18,63,000/- and accordingly, the TDS liability also on the said amount actually paid and interest under section 201(1A) of the Act is liable to be paid on ₹.1,18,63,000/-. Therefore, the sum of ₹.14,23,560/-calculated in para 11 of the order under section 201(1A) of the Act on ₹.1,18,63,000/- is confirmed. Thus, the grounds concerning the issue under section 201(1A) of the Act raised by the assessee for non-resident vendors is dismissed.
