TDS deductible on Audit Fees provision credited to Auditors Account

Citadel Fine Pharmaceuticals (P.) Ltd. Vs ACIT (ITAT Chennai)

On perusal of section 194J of the Act, we find that tax is deductible at source either at the time of credit of expenditure to the account of the payee or at the time of payment whichever is earlier. In the instant case, the assessee had made provision for audit fees to the account of the payee which fact has been mentioned by the ld CITA. Hence the provisions of section 194J of the Act are clearly attracted and non-deduction of tax at source would automatically invite disallowance u/s. 40(a)(ia) of the Act. The statutory auditor is appointed in the annual general meeting of the company by the shareholders and would hold office till the conclusion of the next annual general meeting. Hence the name of the payee (i.e the auditor) is very well known to the assessee in order to make provision for audit fees by crediting to the said auditor’s account. Admittedly the audit fees is an item of expenditure claimed by the assessee as an expenditure incurred on accrual basis during the year under appeal and this is made only based on the auditor’s appointment made in the annual general meeting or in any other extraordinary general meeting, as the case may be. Hence we are not inclined to accept the arguments of the ld AR that the audit report is signed after the end of the year. Accordingly, the Ground No. 9 raised by the assessee is dismissed.

FULL TEXT OF THE ITAT ORDER IS AS FOLLOWS:-