M/S. VOLVO GROUP INDIA PRIVATE LIMITED,HOSKOTE vs. THE PRINCIPAL COMMISSIONER OF INCOME TAX-2, BENGALURU

He further submitted that in the Tax Audit Report (TAR) for the AY 2008-09, similar remarks have been given in by the Tax Auditor in Form NO. 3CD as reported at Sr. No. 27(b) at page No.

He further submitted that in the Assessment Year 2008-09, provision made in the month of March 2006-07 was reversed in the month of April and booked in the books of accounts on the actual invoice received from the vendors / service providers. The assessee has duly deducted TDS at the time of crediting the individual accounts of the vendors/service providers and remitted the TDS amount to the Govt. account as per chapter XVII-B of the IT. Act. Accordingly, the assessee claimed expenditure in the AY 2008-09 for computing taxable income. If the same figure is disallowed in the Assessment Year 2007-08, it would amount to double addition i.e., in the Assessment Year 2008-09. He relied on the following Judgements:-

The Learned DR relied on the order of the lower authorities and he submitted that when the expenditure debited into the profit and loss account, the same should be subjected to TDS to which the assessee has failed to do so and the Pr. CIT has rightly exercised his powers as per section 263 of the Act and directed the AO to disallow the same to which the assessee has not made TDS as per

After hearing both the sides and on perusal of the material on record and orders of the lower authorities, we observed that from the documents filed by the assessee that the disputed amount was claimed as expenditure for the AY 2007-08 but, while computing the taxable profit of the Company the same amount has been added back as disallowance u/s 40(a)(ia) of the Act and the Tax Auditor has also disallowed in his TAR. These amounts represent the payment to contractors of Rs. 77,12,627/-, legal and professional fee of Rs. 1,29,51,700/- and rent of Rs. 29,43,334/-. As per the comment of the Tax Auditor cited supra in the TAR, the assessee made provision at the end of the every month for measuring financial performance and TDS is made at the time of recording/crediting in the books of account, whichever is earlier. The Id. Pr. CIT has observed that at para No.04 of his order that “the assessee has not done TDS on this amount in any of the years but has claimed this amount as expenditure”. We did not find any adverse comment against the assessee in the TAR in regard to the above disputed amount in both the years i.e AY 2007-08 and AY 2008-09. The assessee has filed details of the expenditure and its accounting entries which is placed at paper book page nos. 57 to 66 and copy of C.A. certificate is at page nos. 67-68. 6. In the earlier proceedings before the Tribunal in ITA no. 687/Bang/2015 vide order dated 27.12.2021, after the Hon’ble High Court’s direction, the co-ordinate bench had directed as under :-

On merits, the claim of the assessee is that the amount Rs.2,36,07,661 is reversal of earlier provisions and not claimed as expenditure in the P&L Account or it was deducted from income in the computation of income placed on record at page 79 of PB. Since this amount is not claimed as expenditure in the assessment year under consideration, there is no necessity of deduction of TDS on the sum. It cannot be disallowed on this count by invoking the provisions of section 40(a)(ia) of the Act. However, we find that in respect of repeated requests by the Bench with the Id. AR to show that this amount has not been charged to the P&L account or as a deduction from the income in the computation of income, he failed to establish the same before us. Having no other alternative, we are of the opinion that it is appropriate to remit the issue back to the file of the PCIT with a direction to the assessee to establish that this amount has not gone into the computation of income in the assessment year under consideration. If the assessee claimed this amount as deduction from the income of the assessee by way of charging to the P&L account or by way of deduction from the profits & gains from business or profession in the computation of total income for the AY 2009- 09, the assessee shall deduct TDS on it, otherwise provisions of section 40(a)(ia) are clearly applicable and the assessee is not entitled to claim this amount as deduction even on actual payment of this expenditure in this assessment year under consideration. Accordingly, we remit this issue to the file of the Id. PCIT for de novo consideration and the assessee shall satisfy the PCIT with regard to non-claiming the above amount as expenditure and the PCIT will decide the issue within three (3) months from the date of receipt of this order

During the course of proceedings before the Pr. CIT, the assessee could not demonstrate as per the direction of the co- ordinate bench as directed above. He submitted before the Pr. CIT

From the above submission, it is clear that the assessee has not deducted TDS in any of the AY but has not demonstrated that when the expenditure was reduced from the revenue of the company for computing Income from Business & profession, however, the Tax Auditor has not made any comments on_ this issue in the AY 2008-09. Therefore, considering the totality of facts and with the consent of the Id. AR, we deem it fit to send back the issue to the file of the AO for verification as per the direction by the co-ordinate bench quoted supra in para no.

The AO is directed to give three effective opportunity to the assessee to represent his case and the assessee is also directed to appear before the AO with necessary documents for substantiating his case.

In the result, appeal of the assessee is allowed for statistical purposes.

The order is pronounced in open court on 21" day of November 2022 (George George K) (LAXMI PRASAD SAHU) Judicial Member Accountant Member

DR, ITAT, Bangalore.

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