TMI Blog2021 (2) TMI 127X X X X Extracts X X X X X X X X Extracts X X X X ..... of reversal of entries. This is simply on the basis of real income theory and on the principle that if there is no income, there cannot be any tax. When the assessee has not earned the income, liability in respect of such nonexistent income cannot be fastened with the assessee. We direct the Assessing Officer to delete the addition subject to verification that the assessee has actually forgone its claim of CENVAT credit before the concerned authority. Disallowance of service tax paid on chartered flight and service tax computed on discount received on PSF / UDF - it is the contention of the assessee that while offering income on accrual basis in the preceding assessment years, the assessee had also included the service tax paid on chartered flight and discount received on PSF / UDF and submitted, since the assessee had voluntarily offered such income in the preceding assessment years and since the amount has been actually paid in the impugned assessment year, they have to be allowed as deduction in view of section 43B - HELD THAT:- We find substantial merit in the aforesaid submission of the assessee. Accordingly, we direct the Assessing Officer to verify whether the servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nged the disallowance of service tax adjustment of ₹ 12,17,29,204/- and interest on service tax amounting to ₹ 8,29,749. 3. Briefly the facts are, the assessee, a resident company, is stated to be engaged in the business of operating and chartering aircraft for carrying passenger, cargo or any other commodity. While engaged in such activity, the assessee paid service tax on passenger service fee(PSF)/ user development fee(UDF). On the amount of service tax paid on PSF / UDF and advertisement expenses the assessee claimed CENVAT credit amounting to ₹ 11,10,28,717/- and ₹ 61,99,545/- respectively. Since, the assessee was of the view that CENVAT credit would be granted, he offered these amounts as prior period income in assessment years 2010-11 and 2011-12. However, on being legally advised that it is not entitled to CENVAT credit pertaining to PSF/UDF and advertisement expenses, the assessee reversed the prior period income offered in Assessment Years 2010-11 2011-12 in the impugned assessment year claiming it as deduction under section 37(1) of the Act. Further, the assessee also claimed deduction of ₹ 55,00,941/- being service tax paid on chartered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against any existing liability, it cannot be allowed. As regards the claim of the assessee regarding service-tax component offered to tax on gross basis, he held, unless the assessee pays the amount collected to the government, it cannot be allowed on deemed basis. As regards the interest paid on delayed payment of service-tax, though, in principle he agreed that such interest is compensatory in nature; hence allowable; however, he held that the assessee s claim of deduction can be accepted if the liability for interest has arisen during the year. Being aggrieved, the assessee is before us. 7. Reiterating the stand taken before the departmental authorities, the learned Counsel for the assessee submitted, PSF/UDF are levied by Airport Authority of India (AAI). Every passenger embarking the flight in the airport within its jurisdiction. He submitted, PSF / UDF is collected for provision of various services at the airport, such as, telephone, newspapers, water, toilet, maintenance of the airport, security of various airports including the capital cost towards purchase of assets like arms, metal detector, etc. He submitted, for administrative convenience, the AAI instead of colle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT ITA No.33/Mum/2013 dt 20-11-2015 (3) NCS Distilleries P. Ltd vs ITO ITA No.699/Hyd/2012 dated 16-09-2014 (4) M/s Federal Moghul TPR (I) Ltd vs JCIT ITA No.509/Del/2017 (5) CIT vs Nagari Mills Co Ltd 33 ITR 681 (Bom) 10. The learned Departmental Representative strongly relying upon the observations of the Assessing Officer and learned Commissioner (Appeals) submitted, the expenditure claimed by the assessee, since, relates to prior period, it cannot be allowed in the impugned assessment year. Further, he submitted that CENVAT credit cannot be allowed as it is not a liability of the assessee. He offered similar arguments with regard to service tax liability as well. 11. We have considered rival submissions in the light of decisions relied upon and perused the materials on record. As regards deduction claimed on account of CENVAT credit pertaining to PSF / UDF and advertisement expenses, the departmental authorities have rejected them on the ground that they are prior period expenditure. Facts on record reveal that the CENVAT credit pertained to service tax paid on PSF / UDF and advertisement expenses which were collected by the assessee on behalf of AAI have b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on PSF / UDF. He submitted, since the assessee had voluntarily offered such income in the preceding assessment years and since the amount has been actually paid in the impugned assessment year, they have to be allowed as deduction in view of section 43B of the Act. We find substantial merit in the aforesaid submission of the assessee. Accordingly, we direct the Assessing Officer to verify whether the service tax on chartered flight amounting to ₹ 18,72,540 and discount received on PSF / UDF of ₹ 36,28,401 was paid to the government account in the impugned assessment year and if on verification assessee s claim is found to be correct, the same has to be allowed. 13. As regards interest on delayed payment of service tax, it is a fact on record that learned Commissioner (Appeals) has accepted assessee s claim that such interest is not penal, but compensatory in nature. The doubt raised by him is only with regard to the fact whether the liability relating to such interest payment has arisen during the year. In view of the aforesaid, we direct the Assessing Officer to verify the date of actual payment of interest on delayed payment of service tax. If on verification it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer has allowed amortization of a part of expenditure in terms of section 35D. The only reasoning of the AO while doing so is, since the expenditure is related to expanding the capital base, it is a capital expenditure. However, it is the contention of the assessee that ultimately, the decision to issue IPO was aborted. On a perusal of the balance-sheet of the assessee as at 31-03-2012, we do not find any asset of enduring nature created on account of issuance of IPO. Thus, in our view, this expenditure is akin to expenditure incurred towards aborted project, hence, qualify as revenue expenditure. Further, we find that in case of CIT vs Nimbus Communications Ltd Income Tax Appeal No.4244 of 2010 dated 08-12-2011, the Hon ble jurisdictional High Court has allowed expenditure on issuance of share as revenue expenditure. In the case of CIT vs General Insurance Corporation (2006) 286 ITR 232 (SC), the Hon ble Apex Court has allowed assessee s claim of expenditure in connection with issuance of bonus shares as revenue expenditure. Similar view has been expressed in the other decisions cited before us. Therefore, keeping in view the ratio laid down in the judicial precedents referr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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