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2007 (12) TMI 263 - AT - Income TaxApplicability of section 43B for Service tax payable - Deemed to be revenue receipt? - Receipt of service taxes not to route through the P&L Account - Payments in respect of taxes and Government dues - non-receipt of payments from the receiver of the services there is liable to pay services tax ? - Payment of service tax on or before due date for filing of return of income - HELD THAT:- It is clear from sec 43B, that the rigour of this provision would be attracted only in a case where an item is allowable as deduction but because of the failure to make payment such deduction will not be allowed. It can be argued that in the case of ST also the assessee does not claim deduction since it has been held that non-payment of sales-tax would attract provisions of section 43B, but that is being done on the basis of the principles laid down by the Calcutta High Court in the case of Chowranghee Sales Bureau Ltd. v. CIT [1974 (6) TMI 5 - CALCUTTA HIGH COURT] that sales-tax is part of the trading receipt. Further, section 145A clearly provides that for the purpose of determining income under the head 'Profits and gains of business or profession', the amount of purchase and sales i.e., turnover would include any tax, duty, cess or fee. Therefore, the rigour of section 43B may be applicable in the case of sales-tax or Excise Duty but the same cannot be said to be the position in case of service tax because of two reasons. Firstly, the assessee is never allowed deduction on account of service tax which is collected on behalf of the Government, and paid to the Government accordingly. Therefore, a service provider is merely acting as an agent of the Government, and is not entitled to claim deduction on account of service tax. Hence, on this account alone addition u/s 43B could not be made and the same has been correctly deleted by the CIT (Appeals). Now, in the case of service tax, when and how the amount becomes payable has been provided in section 68 of Finance Act, 1994 as well as Rule 6 of Service Tax Rules - A plain reading of Rule 6 would show that service provider becomes liable to make the payment of service tax by the 5th of the month immediately following the calendar month in which the payments are received towards the value of taxable service. If there is no liability to make the payment to the credit of Central Government because of non-receipt of payments from the receiver of the services, then it cannot be said that such service tax has become payable in terms of clause (a) of section 43B because that clause specifically mentions "sum payable by the assessee". In this regard, the Hon'ble Andhra Pradesh High Court in the case of Srikaollu Subba Rao & Co.[1988 (3) TMI 46 - ANDHRA PRADESH HIGH COURT]. Thus, we are of the view that since service tax was not payable by the assessee, the rigour of section 43B could not have been applied to the case of the assessee. Hence, we find nothing wrong with the order of the CIT (Appeals) on this issue and the same is confirmed. In the result, the appeal filed by the revenue is dismissed.
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