TMI Blog2022 (8) TMI 1123X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessee do not support the contention that mere availability of unutilized tax credit would be deemed to be payment even in absence of actual set off of the outstanding liability with the available tax credit. In our considered view, the provisions of section 43B would not be attracted in case there is actual payment or actual set off (which would be deemed to be payment). Mere availability of unutilized tax credit cannot be deemed to be payment and/or lead to a conclusion that there existed no outstanding Sales Tax/Works Contract tax liability as on the date of filing return of income. Calculation of quantum of outstanding Sales Tax/Works Contract Tax liability for deduction u/s 43B - Increase in profits on account of inclusion of taxes/duties in closing stock and sales has been set off against the decrease in profits arising on account of increase of cost of opening stock, work-in progress and purchase material. Thus, in effect, deduction has been claimed by the Assessee in respect of the tax liability incurred during the relevant previous year even though the same has not been routed through the Profit Loss Account. We note that as per the statement showing details of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directed against the order of CIT(A) deleting the disallowance of INR 3,78,15,218/- made by the Assessing Officer under Section 43B of the Act. The Ground raised by the Revenue are as under: 1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the disallowance made by the AO u/s 43B on account of Sales Tax/Works Contracts tax amounting to Rs. 3,78,15,218/- which was outstanding on the date of filing of return. 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the disallowance made by the AO u/s 43B even though the judgment of the Hon ble SC in the case of Chowringhee Sales Bureau Pvt. Ltd. Vs. CIT (57 ITR 552) is squarely applicable to the case of the assessee. 3. The appellant prays that the order of CIT(A) on the above ground be set-aside and that of the assessing officer be restored. 3. In the Cross-Objection, the Assessee has supported the order passed by the CIT(A) on the following grounds: 1. Erred in challenging the order of the Hon ble Commissioner of Income-tax (Appeals) with regards to unpaid Sales Tax/Works Contract Tax of Rs. 3,78,1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act accepting the contention of the Assessee that provision of Section 43B of the Act are not applicable as the aforesaid Sales Tax/Work Contract Tax liability was not routed through Profit Loss account and therefore no deduction was claimed by the Assessee. The CIT(A), however, rejected the contention of the Assessee that since there was huge input credit available as on the date of filing the return of income there was, in effect, no outstanding liability and/or that the outstanding liability should be deemed to have been set off against the available input credit. The relevant extract of the order of CIT(A) read as under. 5.24 However, facts of assessee's case somewhat different from the facts outlined in case Chowringhee sales bureau (supra). This is because the assessee was entitled to certain credit on input tax paid for purchase of intermediate goods. Therefore, it was eligible to set the input tax credit from the amount collected from its customers before determination of the amount that it was required to actually pay to the sales tax Department. Such a stand vindicated by judgment of the Calcutta High Court in the case of National Standard Duncan Ltd (260 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see has supported the order passed by the CIT(A) by filing the Cross-Objection. 8. The Learned Authorised Representative for the Assessee appearing before us made two-fold arguments. Firstly, he submitted that the Assessee had huge input tax credit available for set-off as on the date of filing income tax return and by virtue thereof, the Assessee did not have any outstanding liability as on the date of filing return of income. In this regard, he relied upon the certificate, dated 19.09.2018, issued by Chartered Accountant placed at 56 and 57 of the paper-book. The Learned Authorised Representative for the Appellant submitted that adjustment/set off, by legal fiction, is deemed to be actual payment of tax liability. Therefore, existence of sufficient input tax credit for setting off the outstanding Sales Tax/Works Contract Tax liability as on the date of filing of income tax return should be treated as payment in terms of Section 43B of the Act. Secondly, without prejudice to the aforesaid, the Learned Authorised Representative for the assessee submitted that the amount of Sales Tax/Works Contract Tax liability was not routed through the Profit Loss Account by the Assessee. Si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... added to the total income of the assessee. Penalty proceedings initiated u/s 271(1) of the IT Act separately for furnishing inaccurate particulars of income leading to concealment of income. Further the assessee company without prejudice argued that the company has not claimed service tax/work contract tax in the P L account and therefore these are not claimed as expenses and accordingly the provisions of section 43B are not applicable in the assessee case . The argument made by the assessee company is not correct in view of the decision of Hon'ble Supreme Court in the case of Chowrangee sales bureau that sales tax is part of the turnover of the assessee Even if accounts are made on exclusion method, sales tax will be treated as part of turnover and even if sales tax is not debited in the P L account, it is deemed to have been claimed in exclusion method. Considering this, even if appellant has not included service tax as part of revenue and not claimed these taxes in P L account, these are deemed to be included in revenue and deemed to have been claimed in P L account. Accordingly, if statutory liability is not paid till the due date of filing return of income, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... larified that the aforesaid set-off was made after the filing of the return of income. From the aforesaid, it is clear that the Assessee had outstanding Sales Tax/Works Contract Tax liability of INR 3,78,15,218/- as on the date of filing return of income which was neither paid nor set off against available input tax credit. The contention advanced on behalf of the Assessee is that since there was huge input tax credit available as on the date of filing return of income, the outstanding Sales Tax/Works Contract Tax liability can be deemed to have been set off against such available input tax credit and therefore, the question of making disallowance under Section 43B of the Act does not arise. We do not find any merit in the aforesaid contention and are of the view that the authorities below were justified in rejecting the contention of the Assessee. In paragraph 5.2.4 of the order, the CIT(A) has rightly observed that the judgments relied upon by the Assessee do not support the contention that mere availability of unutilized tax credit would be deemed to be payment even in absence of actual set off of the outstanding liability with the available tax credit. In our considered view, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccounting, the question of disallowing the deduction not claim would not arise. The above decision of the Hon ble Delhi High Court turned on the fact that the assessee, in that case, had not claimed any deduction in respect of the amount. The Hon ble Bombay High Court, in the case of CIT Vs. M/s Calibre Personnel Services Private Limited: [Income Tax Appeal No. 158 160 of 2013, dated 02.02.2015], concurring with the aforesaid judgment of the Hon ble Delhi High Court concluded that the provisions of Section 43B of the Act are not attracted in absence of an assessee claiming any deduction. The relevant observations of the Hon ble Bombay High Court are as under: 4. The respondent-assessee filed its return of income . The respondent-assessee pointed out that the amount of service tax payable is not taken to the profit and loss account and but credited directly to the Service Tax Payable under the head Current Liabilities in the Balance Sheet. This was as per the guidelines issued by Institute of Chartered Accountants of India. Further it was also pointed out that in the absence of Respondent claiming any deduction on account of the unpaid service tax to arrive at it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 2A attached. Annexure 2A Clause 12(b) of Form 3CD Statement showing details of deviations from the method of valuation prescribed under section 145A and the effect thereof on the Profit or Loss Impact on Profit and Loss SNo. Particulars Increase in Profit Decrease in Profit 1 Increase in cost of opening stock of raw materials, work in process etc. on inclusion of excise duty on which MODVAT/ CENVAT credit is available/availed. - 52,117,546 2 Increase in purchase cost of raw material on inclusion of excise duty on which MODVAT/ CENVAT/ VAT credit is available/availed - 313,135,446 3 Increase in closing stock of raw material, Work in process etc., on inclusion of excise duty VAT 38,901,136 - 4 Accounting of MODVAT/ CENVAT/ VAT credit availed and util ..... X X X X Extracts X X X X X X X X Extracts X X X X
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