JCIT v. Texas Instruments (India) (P) Ltd. [ITA
No. 1958/Bang/2018, dt. 16-12-2020] : 2020 TaxPub(DT) 5389 (Bang-Trib)
Disallowance of year-end provisions voluntarily offered due
to non-deduction of TDS and subsequent reversal of the same in the books -- Taxability
thereof
Conclusion: The
reversed provision in the books in the next assessment year was already offered
to tax and thus cannot be taxed again.
Facts:
Assessee had made year end provisions in assessment year
2006-07 -- Rs. 15.06 + Rs. 9.71 = 24.77 crores. Since no TDS was done on these
year end provisions they disallowed the same and offered the same to tax in
assessment year 2006-07. Subsequently in the next financial year/assessment
year 2007-08 they claimed the Rs. 15.06 as an expense which was paid and on
which TDS was also done which was also allowed as a deductible expense. The
issue was on the reversal of the Rs. 9.71 crores which was again alleged to be
subject to tax due to the reversal entry in the books. Assessee's plea was
since the same was offered to tax in the earlier assessment year the same
cannot be taxed once again. On appeal Commissioner (Appeals) upheld the views
of the assessee on facts. On higher appeal --
Held against the revenue that there was no requirement to
interfere with the correct order of the Commissioner (Appeals) and the
provision which was offered since already offered to tax in assessment year
2006-07 cannot be taxed once again.
Editorial Note: The
case is a classic example of tax planning by voluntarily offering the expense
as a disallowance so as to avoid disallowances under section 40(a)(i) and then
claiming it in the actual year of payment. The overflow reversal also cannot be
taxed again obviously. It will only have timing impact vis-a-vis killing the
opportunity to the assessing officer to make disallowances which are genuine
and not warranted as well. Disallowances on this domain once done set a
precedence for assessees generally.