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2014 (4) TMI 697 - ITAT MUMBAIDisallowance of service tax written off which was non recovered from the customers / clients – Held that:- The assessee has been billing its client towards professional fees which also includes service tax leviable - It is the liability of the assessee to deposit the service tax which is to be collected from the clients - If any of the client has not paid the service tax and the assessee had already taken into consideration the service tax in its gross receipt and also paid the said service tax to the Government account, then the assessee has to recover it from the client - If for some reason, the assessee is unable to recover the service tax, then, either it can write–off in this year or can claim as loss by such an amount - Even under the cash system of accounting, the fees which has been received including service tax, the same has to be taken as receipts of the year. If there is any unrealized amount on account of service tax already taken as part of receipts, the same can be claimed as loss in this year - if the unrealized amount is received later, the same would become taxable in the year of receipt and in such situation also, it cannot be disallowed or added in this year - the finding of the CIT(A) cannot be upheld as the amount which has been written-off on account of service tax is allowable because it has already formed part of income and only the unrealized amount has been written–off, which has to be allowed as deduction, while computing the income from profession u/s 28 – thus, the order of the CIT(A) set aside – Decided in favour of Assessee.
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