No TDS when the identity of payees is not known.

Facts:

• A TDS survey was conducted by the Asstt. Commissioner of Income-tax at the premises of the assessee-company. The Assessing Officer passed an order under section 201 holding that it failed to deduct the TDS in respect of provisions of expenditures amounting to INR 15,07,25,637/- made under several heads of income. The details of provisions on which TDS have not been deducted is given below:

Head of the provision	Amount of provision made	Date of provision	Amount of TDS demand u/s 201(1)	Delay in months	Interest amount Demand u/s 201(1A)
Misc. Expenses – conference expenses	4,00,00,000	31.03.10	40,00,000 @ 10%	37	14,80,000
Business development initiative (reimbursement to dealers)	1,25,61,825	31.03.10	2,51,236 @ 2%	37	92,957
Business development conference	5,00,00,000	31.03.10	50,00,000 @ 10%	37	18,50,000
Product publicity expenses outside India	4,58,14,000	31.03.10	9,16,280 @ 2%	37	3,39,024
Commission to selling agents – domestic	19,64,000	31.03.10	1,96,400 @ 10%	37	72,668
Commission to selling agents – clearing & forwarding	3,85,812	31.03.10	38,581 @ 10%	37	14,275
Total	15,07,25,637		1,04,02,497		38,48,924

• On appeal, the Commissioner (Appeals) sustained the order of the Assessing Officer.

 

• In the instant appeal before the Tribunal, the assessee submitted that next year when the actual expenditure was incurred, the provision was reversed and the deduction was claimed on the basis of actual expenditure incurred. When such expenditure was actually incurred, TDS was made as per law.

 

• On the other hand, the revenue took the stand that provision can be made only when the liability is an ascertained liability. Therefore, the assessee cannot claim that the payee in respect of whom the liability is created is unidentifiable.

 

• He further stated that as per provision of section 194C(2), the tax is to be deducted at source where any sum is credited to any account whether called suspense account or by any other name in the books of account of the person liable to pay such income.

 

Analysis of facts:

The question here is – whether the assessee can be said to be in default for not deducting the TDS in respect of a provision made at the year-end?

Liability to deduct TDS: Explanation 2 of sec. 194C, which exists even now, that the said TDS liability would arise even if the amount is credited to any account whether called suspense account or called by any other name.

Thus, the position of TDS deduction in the above case can be summarized as below:

Whether the payee is identifiable?		The amount payable to the payee is ascertainable?		Liability to deduct TDS on the year-end provision
Yes	+	Yes	=	Yes
No	+	Yes	=	No
No	+	No	=	No
Yes	+	No	=	No

Conclusion:

The ITAT Delhi Bench in the case of Apollo Tyres Ltd. v. Deputy CIT [2017] 78 taxmann.com 195 (Delhi – Trib.) held that where assessee-company could not ascertain the identity of payees while making provision for expenditure under several heads of income at the year-end, the assessee was not required to deduct tax at source on such provision.