Mere provision for expenditure without crystallised liability and identifiable payees does not trigger TDS; taxpayer not in default under section 201 of the Act – Mumbai bench of the Tribunal

In brief

The Mumbai bench of the Income-tax Appellate Tribunal¹ (Tribunal) upheld the deletion of demand on account of non-deduction of tax on year-end provisions. The Tribunal concluded that the year-end provisions recognising estimated expenditure for the relevant financial year (FY), in the absence of crystallised liability and identifiable payees, does not give rise to an obligation to deduct tax at source (TDS). Furthermore, the Tribunal also reaffirmed that the taxpayer cannot be treated as an assesseein-default under section 201 of the Income-tax Act, 1961 (the Act) for non-deduction of tax at source (TDS, as the relevant expenditure has already been disallowed under section 40(a)(i) or (ia) of the Act.