Artha Real Estate Corporation Limited Vs DCIT (ITAT Bangalore)
Year-End Provisions Trigger TDS – ITAT Upholds Default but Grants Relief Window
In Artha Real Estate Corporation Ltd., the Bangalore ITAT dealt with whether TDS is required on year-end provisions and consequent treatment as assessee in default u/s 201.
The assessee argued that:
- Provisions were mere book entries,
- Liability had not crystallized, and
- Entries were reversed in the next year, with TDS deducted later on actual payment.
The ITAT rejected this contention and held:
- Payee, nature, and amount were identifiable at year-end.
- Under Sections 194C / 194J, TDS applies even when amount is credited to “provision/payable account”.
- Accrual system + identifiable liability = TDS obligation triggered, even without payment.
Hence, ITAT confirmed:
- Assessee is in default for non-deduction of TDS on ₹77.55 lakh provisions.
However, relief was provided:
- If recipients have already offered income to tax, assessee can claim benefit under first proviso to Section 201(1) (no double taxation).
- Matter remanded to AO for verification of this relief.
On salary (variable pay):
- ITAT gave relief holding that TDS u/s 192 applies at time of payment, not provision.
- Since tax was deducted in subsequent year on payment, no default arises.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
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