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2019 (10) TMI 309

..... x, duty and cess etc within the due date of filing of the income tax return for the year under consideration - AO was of the view that the provisions of section 43B of the Act require to make the payment of the tax, duty and cess etc within the due date of filing of the income tax return for the year under consideration - HELD THAT:- A plain reading of the above provision reveals that it is confined to the purchase and sale of goods and the determination of the inventories. As such the provision of section 145A of the Act requires the assessee to include the amount of any tax, duty, cess or fee in the value of the purchases, sales and inventories. The provision of section 145A of the Act does not require the assessee to include the amount of service tax either in the purchases or sales. There was no obligation on the part of the assessee to show the amount of service tax collected from the customers as part of the turnover. Accordingly, the assessee has not included the amount of service tax in its turnover which has been shown as current liability. Therefore there was no deduction claimed by the assessee in its profit and loss account at the time of actual payment. We are not incl .....

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..... nce Sec.43B does not apply the said amount was not liable to be disallowed. It is also submitted by your Appellant that Interest for payment of Service Tax not being in nature of Penalty, the same ought to have been allowed as expenditure u/s.37 of the Act. It is therefore submitted that relief claimed above be allowed and the order of the Assessing Officer be modified accordingly. Your Appellant reserves right to add, alter, amend to withdraw any or all Ground of Appeal. The 1st issue raised by the assessee in ground No. 1 is that the learned CIT (A) erred in upholding the addition made by the AO for ₹ 25,40,376/- on account of delayed payment of service tax under the provisions of section 43B of the Act. 2. The facts in brief are that the assessee in the present case is a private limited company and engaged in the business of providing civil construction services on contract basis. The assessee in the year under consideration has shown service tax liability as on 31 March 2013 amounting to ₹ 52,58,086/- only in its financial statements. Out of such liability, an amount of ₹ 25,40,376/- was paid/deposited by the assessee to the service tax department after the du .....

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..... 3 taxman 49 (ALL) (iii) CIT v Ideal Sheet Metal Stamping and Pressing (P) Ltd (2007) 290 ITR 295 4. Being aggrieved by the order of the learned CIT (A) the assessee is in appeal before us. The learned AR before us reiterated the submissions as made before the authorities below after having reliance on the orders/judgments as cited before them. 5. On the other hand the learned DR vehemently supported the order of the authorities below. 6. We have heard the rival contentions of both the parties and perused the materials available on record. The major thrust of the learned CIT (A) was that the impugned amount of service tax, not deposited within the due date of filing return, has to be treated as trading receipts in view of the judgment of Hon ble Supreme Court in the case of Chowringhee Sales Bureau (Pvt.) Ltd. Vs. CIT reported in 87 ITR 542 which reads as under: The amount realised on sales tax by the assessee in his character as an auctioneer formed part of its trading or business receipts. The Supreme Court further held that the fact that assessee credited the amount received as sales tax under the head "sales tax collection account" did not make any material difference. .....

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..... ough such sales tax had not been paid to the sales tax authorities. The question there concerned was the entitlement of the assessee to deduction under sections 10(1) and 10(2)(xv) of the Indian Income-tax Act, 1922. The decision is clearly distinguishable in its application to the present case. Here we are concerned with an assessee who has not even claimed any deduction on the ground of service tax and has not debited the amount to its Profit & Loss Account. Moreover the provisions of section 43B of the Act are quite clear in this regard. The decision of the Calcutta High Court in Chowringhee Sales Bureau (P.) Ltd.'s case (supra) was not in the context of the applicability of section 43B of the Act. 6.2 We further note that the Hon ble Supreme Court in the case of Chowringhee Sales Bureau (Pvt.) Ltd. (supra) has also observed that the assessee shall be entitled for the deduction on account of sales tax liability as and when it will be incurred irrespective of the actual payment. The relevant finding of the Hon ble Apex court stands under: the sales tax amount realised by the assessee formed part of its trading receipts. However, the assessee was entitled to deduction inas .....

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..... referred by the learned CIT-A in his order. 6.6 Now, the controversy arises whether the impugned amount of service tax for ₹ 25,40,376/- paid after the due date of filing of income tax return, is liable to be added to the total income of the assessee under the provisions of section 43B of the Act. At this juncture, we are inclined to refer the relevant provisions of section 43B of the Act which reads as under: Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of- [(a) any sum payable by the assessee by way of tax, duty, cess or fee, by whatever name called, under any law for the time being in force, or] XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX shall be allowed (irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by him) only in computing the income referred to in section 28 of that previous year in which such sum is actually paid by him 6.7 The above provisions deals with certain deduction allowable under the Act from the total income of the assessee but such deductions will n .....

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..... T(A) raising the ground that service tax payable was not wrongly added to the net profit by applying the provisions of section 43B of the Act because service tax payable was not reflected in the profit and loss account With CO No.145/Ahd/2013 Asst. Year 2006-07 and it was a mere liability in the balance sheet for tracking the tax payable because in this case assessee is a mere collecting agent. This ground of the assessee was allowed by ld. CIT(A). In order to further examine the issue that whether service tax payable is covered under the provisions of section 43B sub-section(a) of the Act, we find that section 43B sub-sec.(a) of the Act refers to any sum payable by the assessee by way of tax, duty, cess or fees. Now taking example of service tax there can be two possibility firstly an assessee has taken some services and has paid service tax on such services taken from other persons. In this case service tax is a mere expenditure which the assessee has booked in the profit and loss account and there is no liability in the name of service tax in the balance sheet. Second situation is where assessee has charged service tax on the services rendered and tax so charged has not been pai .....

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..... ssion",- (i) *** (ii) the valuation of purchase and sale of goods or services and of inventory shall be adjusted to include the amount of any tax, duty, cess or fee (by whatever name called) actually paid or incurred by the assessee to bring the goods or services to the place of its location and condition as on the date of valuation; (iii) *** (iv) *** Provided *** Provided further *** Explanation 1.-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. 6.13 From the above, it is also clear that there was no obligation on the part of the assessee to show the amount of service tax collected from the customers as part of the turnover. Accordingly, the assessee has not included the amount of service tax in its turnover which has been shown as current liability. Therefore there was no deduction claimed by the assessee in its profit and loss account at the time of actual payment. In view of the above and after considering all the facts in totality, we are not inclined to uphold the finding of the authorities b .....

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