Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2023 (9) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2023 (9) TMI 1022 - AT - Income TaxAddition of amounts written off - payment of service tax to its distributors - assessee could not prove business expediency of the expenditure under reference - expenditure related to business activity or not? - CIT(A) deleted addition treating the expenditure as revenue expenditure - HELD THAT:- Neither the AO nor the ld CIT DR before us disputed the fact that the assessee made payment of service tax to its distributors who had actually paid the amount of service tax to the exchequer and thus, it was a kind of reimbursement of service tax liability of the assessee to its distributors. It is a fact of common knowledge that the liability of service tax was arose due to application of new taxation of law such as GST and the issue as to whether such liability was to be borne by the distributors of the assessee company or the assessee was not settled up to that point of time. We are in agreement with the contention of assessee, as noted that the ld CIT(A) observed that the payment was shown as loan in the books of account and not claimed as an expenditure on account of service tax in the year of payment since the legality of said liability was not clear and disputed. As to whether the liability has to be borne by the assessee i.e. service receiver or the distributor i.e. service providers. In such a situation when the assessee company has paid amount to its distributors who had actually paid the service tax amount to the exchequer is a kind of adhoc reimbursement of expenditure or liability of service tax. Thus without keeping in view the hardship of the distributors and the liability of the services tax the company decided to write off the amount of loan debited to the respective account of the distributors/ ABOs then the ld CIT(A) was right in concluding that the payment was made by the appellant are directly related to the business activity of the assessee and it was incurred wholly and exclusively for the purpose of business of the assessee due to commercial expediency and the same was allowable as business expenditure. Decided in favour of assessee.
|