TMI Blog2007 (12) TMI 263X X X X Extracts X X X X X X X X Extracts X X X X ..... nghee 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stribution of feature film and software development. During the assessment proceedings the Assessing Officer noticed that service tax was not being routed through the profit and loss account and the assessee had shown liability towards service tax at Rs. 5,72,374 as on March 31, 2002, in its balance sheet. Upon enquiry to furnish the proof regarding payment of service tax on or before due date for filing of return of income it was submitted as under : Note on the applicability of section 43B for service tax payable : Service tax a Central tax that was introduced by making provisions in Chapter V of the Finance Act, 1994 (section 64 to section 96). The Act provides the method of levy, the circumstances in which the levy would arise, inter alia, the manner of payment etc. Section 68 of the Act, prior to its amendment on October 16, 1998, envisaged that the person providing taxable service must collect service tax and then pay it to the Government account. Only when such person failed to collect the tax, person is liable to pay the tax. However, with effect from October 16, 1998, section 68 was amended by omitting the element of ' collection' and it provides that the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stly it was contended that section 43B starts with the non-obstante clause and specifies that the deduction otherwise allowable under the Act shall not be allowed unless it is actually paid. This means, that the claim should be first preferred by the assessee and the same could be disallowed under section 43B only for the reason of failure to make actual payment. If an assessee had not preferred any claim towards service tax, there was no question of disallowing the same. Secondly, it was argued that section 67 of the Finance Act which deals with the service tax was amended with effect from October 16, 1998, and provided that the duty of paying service tax is on the person providing the service in the prescribed manner and this manner was prescribed under rule 6 which further provides that service tax is required to be paid only on the value of taxable service received in a particular month or quarter as the case may be and not on the gross amount charged or billed. The Commissioner of Income-tax (Appeals) found force in the above submission and deleted the addition. Aggrieved, the Revenue is in appeal before us on this issue. 6. Before us the learned Departmental representat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is payable by a dealer as per the Central Sales tax Act and various state sales tax Acts on a specified date of the following month in which the sale is completed irrespective of the fact whether the payment is received by the dealer or not. The liability would arise as soon as the incidence of sale is completed. Similarly, the liability to excise duty is attracted the moment the goods are removed from the warehouse or godown. In the case of PF and ESI, the liability to pay is on the employer irrespective of the fact whether the employer has recovered the same from its employees or not. Whereas in the case of service tax, it becomes payable only when it is received from the client. 10. Learned counsel for the assessee also referred to section 145A of the Income-tax Act and argued that this provision makes it clear that the sales tax, excise duty, etc., have to be treated as part of the purchase and sale of goods whereas that is not the case with service tax. 11. He vehemently argued that section 43B starts with a non-obstante clause and specifies that deduction otherwise allowable under the Act shall not be allowed unless it is actually paid. This means that section 43B would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 under section 43B could not be made and the same has been correctly deleted by the Commissioner of Income-tax (Appeals). 15. The second aspect of this issue is also important. Section 43B(a) uses the expression any sum payable . For making any disallowance, first of all it has to be established that such sum is payable. The dictionary meaning of the word payable in Concise Oxford English Dictionary is : 1. required to be paid; 2. able to be paid; and 3. debts owned by a business. 16. The Chambers Dictionary (New Edition) defines the word payable as that may or should be paid; due or profitable . 17. Black' s Law Dictionary, Sixth Edition defines the term payable as under : Capable of being paid; suitable to be paid; admitting or demanding payment; justly due; legally enforceable. A sum of money is said to be payable when a person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsaction in sales and once such sale is effected, the dealer becomes liable to pay. 20. Now, in the case of service tax, when and how the amount becomes payable has been provided in section 68 of the Finance Act, 1994 as well as rule 6 of the Service tax Rules which read as under: 68. Payment of service tax. (1) Every person providing taxable service to any person shall pay service tax at the rate specified in section 66 in such manner and within such period as may be prescribed. (2) Notwithstanding anything contained in sub-section (1), in respect of any taxable service notified by the Central Government in the Official Gazette, the service tax thereon shall be paid by such per son and in such manner as may be prescribed at the rate specified in section 66 and all the provisions of this Chapter shall apply to such person as if he is the person liable for paying the service tax in relation to such service. Rule 6 of Service tax Rules : 6. Payment of Service Tax. (1) The service tax shall be paid to the credit of the Central Government by the 5th of the month immediately following the calendar month in which payments are received, towards the value of taxable ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Srikakollu Subba Rao and Co. v. Union of India [1988] 173 ITR 708 has made the following observations (page 718 of ITR) : 17. One other contention addressed to us is that the liability to pay sales tax for the month of March 1984, was disallowed in terms of section 43B in all the cases before us. Shri Swamy, learned counsel, pointed out that the petitioners filed A2 monthly returns according to which they pay the taxes. Our attention has been invited to rule 17 of the Andhra Pradesh Sales tax Rules, 1957, which in terms, provides that the tax in relation to the return shall be paid before the 25th day of the succeeding month. It is urged that where the statute itself prescribes the date of payment no exception could be taken acting under section 43B, that the amount was not paid rendering justification for its disallowance. It is urged that section 43B can have no application to cases where the statutory liability which was incurred in the accounting year is also not payable according to the statute in the same accounting year. We find considerable force in the contention of Shri Swamy. In order to apply the provisions of section 43B, it seems to us that not only should th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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