S.201(1)/201(1A): Whether the assessee could be treated as an ‘assessee in default’ within the meaning of section 201(1) of the Act and consequentially liable for interest u/s 201(1A) of the Act, in respect of non- deduction of tax at source on provision for expenses made at the end of the year, falling within the ambit of provisions of sections 194C, 194I and 194J of the Act?

Held: No. The assessee had stated that it had been regularly following the practice of making provisions for expenses for which parties are not identifiable or amounts payable were not identifiable or bills have not been received or the same have not been processed for payment/credit to the accounts of the payees, based on Accounting Standards-29 “Provisions, Contingent Liabilities & Contingent Assets” issued by the Institute of Chartered Accountants of India (ICAI) while finalizing books of account. It is a fact on record that such provisions were made in view of accrual method of accounting followed by the assessee and the same were reversed in the books of account on the first day of the immediately succeeding year. It is not in dispute that as and when the invoices are received by the assessee in the succeeding year with date of invoice falling in the succeeding year, the same are processed for payment wherein due deduction of tax at source have been made and remitted to the account of the Central Government within the prescribed time. We find that this is a consistent practice followed by the assessee on year-to-year basis. The fact of reversal of these expenses in the succeeding year are enclosed in pages 23 to 29 of the paper book. This is not disputed by the revenue before us. The fact of the assessee deducting the tax at source in the succeeding year and remitting the same to the account of the Central Government on 02.05.2013, 30.05.2013, 05.07.2013 and 06.09.2013 are enclosed are enclosed in pages 33-37 of the paper book. We find that the issue in dispute is no longer res integra in view of the decision of the Hon’ble jurisdictional High Court in the case of UCO Bank vs. Union of India reported in 369 ITR 335.

In the absence of an ascertainable amount and identifiable payee, the machinery provisions of recovering tax deducted at source falls flat because in either way, it does not aid the charge of tax u/s 4 of the Act, but, takes a form of separate levy independent of other provisions of the Act. Similar view was also taken in the Hon’ble Jurisdictional High Court in the case of DCIT vs. Ericcson Communications Ltd. reported in 378 ITR 395 (Del).