The Mumbai bench of the Income Tax Appellate Tribunal ( ITAT ) directed the AO to allow Tax Deducted at Source ( TDS ) credit to transferees, even if the certificates are in the name of the amalgamated or demerged company.
The assessee has raised grounds with regard to non-granting of TDS to the tune of Rs.8, 13, 81,645/-. Mr. Percy Pardiwala representing the assessee submitted that the TDS credit was not given by the AO for the reason that the TDS certificates are not in the name of assessee, but it was in the name of amalgamated/demerged company. He submitted that the relevant income has already been assessed in the hands of the assessee and hence the TDS deducted out of the said income should be allowed credit in the hands of the assessee.
In this case, the two member bench of the tribunal comprising C V Bhadang ( President ) and B.R. Baskaran ( Accountant member) held that the resulting company in case of demerger and transferee company in the case of transfer, are eligible to claim TDS credit, even if the TDS certificates are in the name of demerged company/transferor company.
In the instant case, the assessee has offered the relevant income, even though the TDS certificates were in the name of amalgamated/demerged company. ITAT, directed the AO to allow TDS credit to the assessee after verifying that the relevant income has been assessed by the AO in this year.
The next issue contested by the assessee relates to the disallowance of Provision for Expenses. As noticed earlier, the assessee had provided for outstanding expenses as at the yearend in books of accounts. Since no TDS was deducted, it voluntarily disallowed 30% of Provision for outstanding expenses under Section 40(a)(ia) of the Income Tax Act.
He also observed that the assessee did not explain the method of accounting, when the actual expenses exceeded the provision amount. The AO also found fault with the provision made for Agency incentive, Channel placement charges etc. Accordingly, the AO came to the conclusion that the provision for outstanding expenses has been made on adhoc basis and there was no reasonable certainty of incurring expenses.
Accordingly, the AO held that the provision for outstanding expenses was disallowable in toto. Since the assessee had disallowed 30% of expenses under Section 40(a)(ia) of the Income Tax Act, the AO disallowed the remaining 70% of the claim.
The bench viewed that the provision for outstanding expenses claimed by the assessee was an ascertained liability only. Accordingly, ITAT viewed that the DRP was not justified in confirming the disallowance made by the AO. Accordingly, the addition of 70% of expenses amounting to Rs.109, 46, 79,368/- made by the AO was liable to be deleted.
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