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2016 (8) TMI 1096 - BOMBAY HIGH COURT

2016 (8) TMI 1096 - BOMBAY HIGH COURT - TMI - Addition u/s 145A - inclusion of service tax as part of trading receipts - Tribunal deleted the addition - Held that:- We do not find any ambiguity in Section 145A of the Act as arising for our consideration. However, even if one were to assume the main part of Section 145A of the Act, is capable of more then one interpretation, the interpretation sought to be canvassed by the Revenue, is not sustainable. Therefore, Section 145A of the Act would have .....

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come Tax Vs. Ovira Logistics P. Ltd. [2015 (4) TMI 684 - BOMBAY HIGH COURT ] and Commissioner of Income Tax Vs. Calibre Personnel Services Pvt. Ltd. (2015 (2) TMI 587 - BOMBAY HIGH COURT ) - INCOME TAX APPEAL NO. 247 OF 2014 WITH INCOME TAX APPEAL NO. 255 OF 2014 - Dated:- 16-8-2016 - M.S. SANKLECHA AND A.K. MENON, J.J. For The Appellant : Mr. Suresh Kumar a/w Ms. Samiksha Kanani For The Respondent : Mr. Percy Pardiwala, Senior Counsel a/w Mr. Atul Jasani P.C. 1. These Appeals under Section 260A .....

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as part of trading receipts, by holding that the provisions of Section 145A of the Act are applicable to manufacturing segment of business and not to a service provider company. (ii) Whether on the facts and in the circumstances of the case and in law, the Tribunal was correct in consequently deleting the addition u/s 43B of the Income Tax Act, 1961 being unpaid service tax liability disallowed without appreciating the fact that service tax stands on the same footing as excise duty or sales tax .....

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ection 145A(ii) of the Act. Besides, the Assessing Officer also sought to invoke Section 43B of the Act on the ground that the billed amount of service tax had not been paid over to the Government till the due date of filing the return of income. The Assessing Officer also sought to recast the respondent's profit and loss account so as to reflect the receivable service tax as a part of the consideration for the services rendered. The respondent assessee contended that Section 145A(a)(ii) of .....

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ered. Further Section 43B of the Act was invoked to add the service tax billed, which has not been paid over to the Government. 4. In appeals for both the assessment years, the Commissioner of Income Tax (Appeals) [CIT(A)] held that Section 145A(a)(ii) of the Act would apply as it is not restricted only to manufacturing and trading companies. It was concluded that the service tax stands on the same footing as excise duties, sales tax and other taxes, which are collected to be paid over to the Go .....

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the Government arose before the last date of filing of the Returns. Besides, it held that no deduction had been claimed on the aforesaid amounts while determining its income. Accordingly, the appeal of the respondent assessee was allowed. 6. Regarding question (i) : (a) For the better appreciation of the controversy to be examined, it is necessary to reproduce Section 145A of the Act, which at the relevant time read as under : 145A Notwithstanding anything to the contrary contained in Section 14 .....

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aluation. Explanation For the purposes of this section , any tax, duty, cess or fee (by whatever name called) under any law for the time being in force, shall include all such payment notwithstanding any right arising as a consequence to such payment. (b) The grievance of the Revenue to the impugned order of the Tribunal is that Section 145A(a)(ii) of the Act would apply as the amount receivable on rendering of services would also include the service tax. This service tax is similar to excise du .....

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to the place of its location. In this case, the respondentassessee is rendering services. Thus, on the plain reading of Section145A(a)(ii) of the Act, it is self evident that the same would not apply to the service tax billed on rendering of services. This is so as the service tax billed has no relation to any goods nor does it have anything to do with bringing the goods to a particular location. (e) The Explanation to Section 145A(a) of the Act does not expand its scope. An Explanation normally .....

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as provided in the main part. The Explanation in this case clarifies/ explains that any tax, duty, cess or fee paid or incurred will have to be taken into account for valuation of goods even if such payment results in any benefit/ right to the person making the payment. This Explanation was necessary as otherwise in terms of Accounting Standard - (AS2) issued by the Institute of Chartered Accountants of India provides that cost of goods would include the duties and taxes paid, other then the dut .....

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st introduced in India by Finance Act, 1994. Section 145A of the Act was first introduced into the Act only by Finance (No.2) Act, 1998 w.e.f. 1st April, 1999. It was thereafter substituted by Finance (No.2) Act, 2009 which is identical, except for addition of clause (b), dealing with interest. However, the Parliament did not while substituting it, deem it fit to explicitly include the valuation of Services therein. Thus, it is clear that the legislature never intended to restrict the applicabil .....

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