ITAT permits deduction to Deloitte Haskins & Sells over expenditure showing TDS deducted
The Income Tax Appellate Tribunal (ITAT), Delhi Bench held the issue in favour of M/s Deloitte Haskins & Sells (Appellant) and granted deduction for expenditure representing TDS deducted The Coram consisting of Prashant Maharishi and Sudhanshu Shrivastava clarified that the assessee/ appellant has made a cash payment to various parties after duly deducting tax at source and hence it allowed a deduction to the appellant.
The facts of the case are that the appellant is a Chartered Accountant Firm. For the Assessment Year (AY) 2011-12, the return of income was filed declaring an income of Rs.10,44,95,714. The appellant was selected for scrutiny and the assessment was completed at an income of Rs.15,11,45,380 after making the various disallowances or additions.
The Assessing Officer (AO) did not permit the deduction of expenditure of Rs. 44,09,937 that was represented tax deducted at source for Financial Year 2010-11 but paid in the Financial Year 2011-12. The AO did not grant the appellant's claim of Tax Deducted at Source (TDS) amounting to Rs. 8,59,85,393. The appellant raised the issue regarding the payment of the TDS amounting to Rs. 44,09,937.
Aggrieved, the appellant approached Commissioner of Income Tax (Appeals) [CIT (A)] challenging the orders of the AO in both the captioned AYs. However, his appeals were only partly allowed by the CIT(A).
The CIT(A) directed the AO to allow a deduction for expenditure of Rs.44,09,937 representing TDS deducted in the Financial Year 2010-11 but paid in the Financial Year 2011-12. The portion of the amount paid to them has already been allowed to the appellant as deductible expenditure.
The appellant filed an appeal before the ITAT challenging the order of the CIT(A). The ITAT stated that the moment the appellant deducts the tax at source from the sums paid to the other person it becomes the liability of the assessee who can be held to be an assessee in default for the above sum as well as liable to pay interest and penalty also.
The ITAT put reliance on the judgment of the Bombay High Court in the case of DCIT v. Wadia Ghandy & Company, vide judgment dated 12 February 2019, wherein the Court noted that payment to the partner would amount to the diversion of income at source by overriding title.
The ITAT, Delhi Bench stated that an identical issue had come up before the ITAT Chennai bench in the case of a related concern of the assessee in the assessment year 2011-12 and the ITAT Chennai bench through an order dated 25 November 2018, put reliance on an order of ITAT Mumbai Bench in the case of CC Chokshi & Co. for assessment years 2000-01 and 2001-02 had held the issue in favour of the assessee.
The amount of TDS is to be considered as the sum paid by the assessee on behalf of the recipient of the income. The ITAT gave directions that the impugned amount of TDS should be granted as a deduction in the assessment year 2011-12.