Pr. Commissioner Of Income Tax – 8 v. M/S. Rediff. Com India Ltd

jsn 916-itxa-647-2017.doc IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 647 OF 2017 Pr. Commissioner of Income Tax – 8 …Appellant Versus M/s. Rediff. Com India Ltd. …Respondents ---------- Mr. Suresh Kumar for the Appellant. Mr. Madhur Agrawal with Mr. Fenil Bhatt i/b. Kanga & Co. for theRespondent. ---------- CORAM :K.R. SHRIRAM & R.I. CHAGLA, JJ. DATE : 29 SEPTEMBER, 2021. (THROUGH VIDEO CONFERENCING) ORDER : 1.This appeal has been filed impugning an order dated13th April 2016 passed by the Income Tax Appellate Tribunal,Mumbai (“ITAT”) on the ground that the ITAT erred in confirming theorder passed by the Commissioner of Income Tax (Appeals) (“CIT(A”), wherein CIT (A) had deleted the disallowance made underSection 40a(ia) of the Income Tax Act, 1961 (“the said Act”), despite 2.Respondent was engaged in business of providinginternet access services to corporate clients and viewers of its website“Rediff.com”. It was one of the leading internet destinations / portal.The Assessing Officer had added sum of Rs.6,32,79,350/- to therespondent’s income by disallowing the deductions claimed holding,interalia, (a) the provision of expenses was on estimate basis, (b) forunascertained liabilities, (c) had nothing to do with actualexpenditure, (d) expenses were not debited to account of a particularparty and (e) no TDS had been deducted. 3.Against this order respondent preferred an appeal beforeCIT(A) and the CIT(A) after considering the facts of the case heldthat the respondent had satisfactorily explained that the provisionswere made in respect of expenses actually incurred during the yearbut the bills / invoices of which remained to be received from theparties during the year. The CIT(A) held that in view of that positionthe Assessing Officer’s findings does not appear to be correct that theprovisions were made on estimate basis and the said provisions werenot pertaining to expenditure actually incurred during the year itself. 916-itxa-647-2017.docCIT (A) opined that though the bills for all expenses were notreceived during the year but the purchases were made or the serviceswere received during the year itself in respect of such expenses, theseprovisions represent the expenses pertaining the year underconsideration. The CIT(A) held that the liability for such expensecrystallized during the year itself though the quantam was notascertained at the end of the year. The CIT (A) relying upon thedecision of Bharat Earth Movers Vs. Commissioner of Income Tax[1]and other decisions held that the expenses pertaining to suchcrystallized liability were required to be allowed as deduction. In theabsence of actual invoices the provision was required to be made onestimate basis only. The CIT(A) also observed that the respondenthad received bills for such provisions for expenses in subsequent yearand deduction has not been claimed in the subsequent year. TheCIT(A) has also held that since only a provision was made in respectof expenses pertaining to the year under consideration, the bills ofwhich were not received during the year, there was no requirementof deduction of tax at source on such provision since neither theamount was credited in party account nor could be related to anyparty. The CIT(A) concluded that the respondent’s claim for provision 12000 (245) ITR 428 of expenses was allowable as deduction since provision waspertaining to the liability crystallized during the year. 12000 (245) ITR 428 of expenses was allowable as deduction since provision waspertaining to the liability crystallized during the year. 4.Appellant approached the ITAT being aggrieved by theorder of the CIT(A). The ITAT has noted the factual position that asand when payments were made by respondent to third parties, TDShas been deducted has not been disputed by the revenue and it isnobody’s case that any payment has been made subsequently withoutdeduction of tax source. It is also observed that the admitted facts onrecord are, in the subsequent years, even excess amount of provisionshas been written back and hence there is no loss to revenue. The ITATrefused to interfere. 5.We have considered the facts and circumstances of thecase and the orders passed by CIT(A) as well as ITAT which isimpugned in this appeal. In our view the CIT(A) was correct indeleting the disallowance made under Section 40a(ia) of the Act andthe view of CIT (A) that respondent could not have deducted TDS onprovisions made in respect of expenses pertaining to the year underconsideration is correct. Moreover, it is not disputed that insubsequent years when actual payments were made TDS has been 916-itxa-647-2017.doc deducted. 6.In our view, the Tribunal has not committed anyperversity or applied incorrect principles to the given facts and whenthe facts and circumstances are properly analyzed and correct test isapplied to decide the issue at hand, then, we do not think thatquestion as pressed raises any substantial question of law. 7.The appeal is devoid of merits and it is dismissed withno order as to costs. [R.I. CHAGLA J.] [K.R. SHRIRAM, J.]