DEPUTY COMMISSIONER OF INCOME-TAX, (TDS),, PUNE vs. M/S. HONYWELL AUTOMATION (I) LTD,, PUNE

The only issue is to be decided is as to whether the CIT(A) is justified in holding that the assessee is not in default within the meaning of Section 201(1) & 201(1A) of the Act in the facts and circumstances of the case.

Heard both the parties and perused the material available on record. We note that the assessee is engaged in the business of process control and management controls on turnkey basis covering obtaining or supplying technological know-how, research and development, consultancy, trading, leasing, procurement sales manufacture of all connected hardware system. It was explained that the assessee makes monthly provisions for expenses on estimation basis in the books of accounts and reverses these provisions in the subsequent month. The provision made at year end in the month of March is subsequently reversed in April in the next financial year. We note that the monthly provisions are made to measure the correct financial performance of the assessee on a month by month basis and it was explained not credited to any party account. It is also noted when the assessee becomes liable to any party, a liability in favour of the party is recognized by crediting the specified party account. There is no dispute by the Revenue that this year end provision made by the assessee on estimated basis and that on the first day of subsequent year, the above estimated provisions are reversed and expenditure is booked on actual basis. We note that in the computation of income at Page No. 20 of the paper book where the details of heads under tax is deductible at source are mentioned which are payments to contractors and sub-contractors u/s. 194C, fees for professional or technical services u/s. 194J and payment of rent u/s. 194I of the Act totaling Rs.7,09,01,641/- was disallowed as inadmissible u/s. 40(a)(i)/40(ia) of the Act which at Page No. 31 of the paper book. The CIT(A) examined the accounts of assessee particularly computation of income as discussed above and held that the assessee made provision against the expenses and no expenditure incurred actually, thus, no liability arise on the assessee to deduct any tax on such amounts. We note

In the result, the appeal of Revenue is dismissed.