2016 (2) TMI 1263 - AT - Income Tax

Non-payment of liability of service tax u/s.43B - HELD THAT - In a situation when deduction has not been claimed and a separate account has been maintained then disallowance u/s 43B of the IT Act should not be made. In the case of CIT Vs Noble Hewitt (India) (P) Ltd. 2007 (9) TMI 238 - DELHI HIGH COURT the case of Chowringhee Sales Bureau P. Ltd. Vs CIT 1974 (6) TMI 5 - CALCUTTA HIGH COURT has been distinguished and it was held that when the amount of tax has not been debited to profit loss account as an expenditure nor claimed any deduction in respect of the said amount then the question of disallowance u/s 43B of the IT Act does not arise. Respectfully following this decision we hereby hold that there was no fallacy in the view taken by the learned CIT (A). The same is hereby confirmed and ground No.1 of the appeal of the Revenue is therefore dismissed.

Summary

Issues:
Appeal against deletion of addition of service tax liability under section 43B of the Income Tax Act, 1961.

Analysis:
The appeal arose from an order of the ld CIT(A), Raipur concerning the assessment year 2009-2010. The main issue raised was the deletion of an addition of Rs. 56,80,797 made by the Assessing Officer on account of nonpayment of service tax liability under section 43B of the Income Tax Act, 1961. The Assessing Officer noted that the assessee, a mechanical contractor, had collected service tax but failed to deposit it in the Government account within the specified time, resulting in the tax being levied under section 43B. The matter was taken to the first appellate authority by the aggrieved party.

During the proceedings before the ld CIT(A), the assessee argued that the collected service tax was not reflected in the profit and loss account and thus fell outside the scope of section 43B. Citing relevant case laws, the ld CIT(A) allowed the claim made by the assessee. The ITAT, in its analysis, referred to a previous case and concluded that if the tax liability was not claimed as a deduction and a separate account was maintained, disallowance under section 43B should not be made. The ITAT upheld the decision of the ld CIT(A) based on established legal principles and circulars issued by the CBDT.

Considering the precedents and legal interpretations, the ITAT found that the issue raised by the revenue department had already been settled in favor of the assessee. Therefore, the ITAT dismissed the appeal filed by the revenue, confirming the decision of the ld CIT(A) to delete the addition of the service tax liability under section 43B. The judgment was pronounced in open court on 12/02/2016.