Sapphire Foods India Limited Vs OSD TDS (ITAT Mumbai)
Assessee, operating KFC & Pizza Hut restaurants, was treated as an assessee-in-default u/s 201(1) & 201(1A) for not deducting TDS on year-end provisions of ₹5.70 crore towards rent, contractors, professional & technical charges, etc. The AO raised a total demand of ₹64.51 lakh, holding that TDS should have been deducted even on year-end accruals.
Assessee argued that:
- Payees were not identifiable at year-end.
- 30% of such expenses were disallowed suo motu u/s 40(a)(ia) in the return.
- TDS was deducted & deposited in the subsequent year when invoices were received.
CIT(A) upheld the AO’s order.
Tribunal’s Findings/ Decision
- Year-end provisions made on estimated basis without identifying specific payees do not attract TDS, following Subex Ltd. (Kar HC) & Viacom 18 Media Pvt. Ltd. (ITAT Mumbai).
- Such provisions are accounting entries for matching principle & are reversed next year.
- However, factual verification of actual TDS deduction in the subsequent year was not done.
- Matter remanded to AO to verify whether TDS was deducted & paid in the following year.
- Interest u/s 201(1A) restricted up to the date of actual TDS payment.
- Appeals allowed for statistical purposes for all years (AYs 2016–17 to 2023–24).
No TDS liability arises on year-end provisions where payees are unidentifiable & liability crystallizes later; verification required for subsequent deduction
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