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TMI Blog2024 (1) TMI 1029X X X X Extracts X X X X X X X X Extracts X X X X ..... ue of deducting of TDS in respect of Bill Management Services paid to the Service Providers namely BITS, Bellary, M/s. New Horizon Cyber Soft Ltd and found that the services rendered by these service providers have to render the following services, as per the terms of agreement like computerized data processing at Sub-Divisions by providing computers systems, operating of systems and maintenance of the computer software etc, accordingly, the Appellant made payment as per the provision of section 194J of the Act and same ought to be allowed." 3.1 Facts of the case are that the assessee expended certain expenditure towards Managerial and Technical services. However, from the details furnished with regard to TDS deducted and remitted that in some cases no TDS has been made and in respect of some cases, grant of TDS deducted has not been remitted before the specified due date stipulated and in respect of payments made against bill management services TDS has been made u/s 194C instead of deducting the rate applicable for such managerial and technical services u/s 194J of the Act. As the assessee has failed to deduct tax and remitted the same before the specified due date, the ld. AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion TDS not deducted/TDS deducted but not remitted to govt. account before the specified date (As per Annexure A) 1 Payment made to contract agencies for billing and collection (includes Rs. 6070275 on account of no deduction of tax) 15636216 2 Rent payments 3195021 3 Paid to contract agencies and security agencies 1796582 4 Remuneration paid to CAs for auditing 28781 5 Remuneration to contractors 663500 6 Legal charges 441800 7 Payment to contractors 2619832 Total 24381732 6.1 Short deduction of tax which ought to have been done u/s 194J of the Act deducted u/s 194C of the Act. Sl. No. Description Amount 1 Aggregate amount of payment made towards bill management services 91615206 2 Amount of TDS required to be deducted u/s 194J 10380002 Less: Amount of TDS deducted 3040880 Amount of short deduction of tax 73,39,122 3 Proportionate payments relating to short deduction of tax Less: Amount disallowed separately on account of no deduction of tax (included in the amount disallowed at Rs. 15636216) 64776011 6070275 4 Amount to be disallowed u/s 40(a)(ia) for short deduction of tax u/s 194J 58705736 6.2 In our opinio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e u/s 43B of the Act of Rs. 73,13,171/- on the ground that payments not made to government within due date. 5. The Learned CIT(A) ought to have appreciated the submission of the Appellant that the expenses can only be claimed in the year of payment. Section 43B provisions disallow the sum not paid in the financial year or before the due date of filing tax returns, thus, the disallowance made has to be deleted." 8. Facts of the issue are that the assessee did not pay full amount outstanding as on 31.3.2010 before the specified date as provided u/s 43B of the Act in respect of following payments: Sl. No. Particulars Amount 1 Royalty payable to government 1,08,564 2 Inspection charges payable to government 11,725 3 Rates and rates 6,28,072 4 Sales tax (TDS payable) 65,64,810 Total 73,13,171 8.1 The NFAC dismissed the grounds on the reason that the assessee has admitted this addition. Against this, assessee is in appeal before us. Before us, ld. A.R. submitted that the above impugned amount is not charged to P&L account and also not claimed any expenditure on this count. This amount cannot be disallowed by invoking provisions of section 43B of the Act. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eting the additions made on account of disallowance u/s 43B." 9 We further find that in the case of CIT Vs. Noble and Hewitt India Pvt. Ltd. (Supra) Hon'ble Delhi High Court has held as under :- "In our opinion since the assessee did not debit the amount to the Profit & Loss Account as an expenditure nor did the assessee claim any deduction in respect of the amount and considering that the assessee is following the mercantile system of accounting, the question of disallowing the deduction not claimed would not arise. Ld. Counsel for the revenue submits that the assessee has sought to evade tax under the mercantile system of accounting. We are of the view that it is not for the revenue authorities to tell the assessee how to maintain its accounts. We cannot find any fault in the view taken by the Tribunal and find no merit in this appeal." 10. From the above case lodge it is clearly evident that provisions of section 43B are not applicable to the service tax liability. Accordingly, respectfully following the decisions as above the set aside orders of authorities below, and decide the issue in favour of assessee." 9. Considering the above, we find that the above sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or deduction and, thus, it was argued, the question of disallowance u/s 43B of the Act does not arise. The AO took a view that even though the assessee had not claimed the same in its P & L account as an expenditure and, therefore, section 43B has no application. However, he was of the view that the fact remains that service tax collected by the assessee but not paid to the Government account up-to the end of the financial year or even up-to the date of filing of the return of income and, thus, by not including this amount in its service, it had clearly made a claim indirectly. As rightly highlighted by the CIT(A), the assessee's plea that sales-tax was different from service tax cannot be accepted in the present circumstance as what the assessee was a firm of Chartered Accountants is selling is services and not goods, so the tax applicable is service tax which stands on the same bracket as sales tax in terms of services rendered as sales tax holds for goods sold. We have also observed that the AO had pointed out that the said amount has been included as business receipts in its TDS Certificates and as such, the same should have been included in its receipts. This has not been prec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appeals)". However, in the instant case, as admitted by the assessee, service tax has been collected but not paid to the Government account either up-to the end of the financial year or even up-to the date of filing of the return of income. Thus, the case law relied on by the assessee is distinguishable and cannot come to the rescue of the assessee. (ii) CIT v. Noble and Hewitt India (P) Ltd (Del) 7.2.2 The Hon'ble Delhi High Court was predominantly concerned with the disallowance of deduction by invoking the provisions of section 43B of the Act. The Hon'ble Delhi High Court was not considering the issue whether the service tax collected and the remaining unpaid till the due date of furnishing of the return forms the part of the total income for the current year. (iii) DCIT v Manish M Chheda 29SOT 138 - Mumbai ITAT 7.2.3 In the above case, the Hon'ble Mumbai Tribunal was considering the applicability of section 28(iv) of the I T Act. In the instant case, it is an admitted fact that during the course of assessee's profession, a sum of Rs. 29,60,000/- was realised/collected as service tax payable and the same is not capital receipt. The moment the service tax is realis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 145, the valuation of purchase and sale of goods and inventory, for the purpose of determining the income chargeable under the head profits and gains of business or profession, shall be (i) in accordance with method of accounting regularly employed by the assessee; and (ii) further adjusted to include the amount of any tax, duties, cess or fees, by whatever name called, actually paid or incurred by the assessee, to bring the goods to the place of its location and condition, as on the date of valuation. As per the explanation under the said clause, it is pointed out that for the purpose of this section, any tax, duties, cess or fees, by whatever name called, under any law for the time being in force, shall include all such payments, notwithstanding any right arising as a consequence to such payments. Sub-clause (b) talks of interest received by the assessee on compensation or enhanced compensation, which is not relatable to the issue before us. The aforesaid provisions of section 145A of the Act have been substituted by the Finance (No.2) Act, 2009 w.e.f. 01.04.2010. Prior to its substitution, which was inserted by the Finance (No.2) Act, 1998 w.e.f. 01.04.1999, the section p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding 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 8. Rule 4 of the CENVAT Credit Rules, 2004 reads as under : Rule 4. Conditions for allowing CENVAT credit.- (1) The CENVAT credit in respect of inputs may be taken immediately on receipt of the inputs in the factory of the manufacturer or in the premises of the provider of output service: Provided that in respect of final products, namely, articles of jewellery falling under heading 7113 of the First Schedule to the Excise Tariff Act, the CENVAT credit of duty paid on inputs may be taken immediately on receipt of such inputs in the registered premises of the person who get such final products manufactured on his behalf, on job work basis, subject to the condition that the inputs are used in the manufacture of such final product by the job worker. (2) (a) The CENVAT credit in respect of capital goods received in a factory or in the premises of the provider of output service at any point of time in a given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chase or loan agreement, from a financing company. (4) The CENVAT credit in respect of capital goods shall not be allowed in respect of that part of the value of capital goods which represents the amount of duty on such capital goods, which the manufacturer or provider of output service claims as depreciation under section 32 of the Income-tax Act, 1961( 43 of 1961). (5) (a) The CENVAT credit shall be allowed even if any inputs or capital goods as such or after being partially processed are sent to a job worker for further processing, testing, repair, re- conditioning, or for the manufacture of intermediate goods necessary for the manufacture of final products or any other purpose, and it is established from the records, challans or memos or any other document produced by the manufacturer or provider of output service taking the CENVAT credit that the goods are received back in the factory within one hundred and eighty days of their being sent to a job worker and if the inputs or the capital goods are not received back within one hundred eighty days, the manufacturer or provider of output service shall pay an amount equivalent to the CENVAT credit attributable to the inputs o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vice tax is collected, the provision is as under : 173A. Service Tax collected from any person to be deposited with Central Government:- (1) Any person who is liable to pay service tax under the provisions of this Chapter or the rules made thereunder, and has collected any amount in excess of the service tax assessed or determined and paid on any taxable service under the provisions of this Chapter or the rules made there under from the recipient of taxable service in any manner as representing service tax, shall forthwith pay the amount so collected to the credit of the Central Government. (2) Where any person who has collected any amount, which is not required to be collected, from any other person, in any manner as representing service tax, such person shall forthwith pay the amount so collected to the credit of the Central Government. (3) Where any amount is required to be paid to the credit of the Central Government under sub-section (1) or sub-section (2) and the same has not been so paid, the Central Excise Officer shall serve, on the person liable to pay such amount, a notice requiring him to show cause why the said amount, as specified in the notice, should not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service provider, the date of completion of each such event as specified in the contract shall be deemed to be the date of completion of provision of service; (ii) wherever the provider of taxable service receives a payment up to rupees one thousand in excess of the amount indicated in the invoice, the point of taxation to the extent of such excess amount, at the option of the provider of taxable service, shall be determined in accordance with the provisions of clause (a). Explanation - For the purpose of this rule, wherever any advance by whatever name known, is received by the service provider towards the provision of taxable service, the point of taxation shall be the date of receipt of each such advance." 13. After considering the above provisions, it is clear that the assessee has to pay service tax within due date as set out under the above provisions either by way of cash/cheque or by way of availing CENVAT credit as per Rules as stated above, but the assessee did not do so. The liability of service tax had also arisen as per the point of Taxation Rules, as stated above. 14. Now, we have to examine the case of the assessee in the light of the above provisions. Du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the return is to be disallowed, though it was not charged to the P&L account and it attracts the provisions of section 43B of the Act and the provisions of section 145A of the Act cannot be applied in view of the non-obstante clause in section 43B of the Act. Same view has been taken by Cochin Bench of Tribunal in the case of ACIT Vs. Kunnel Engineers & Contractors Pvt. Ltd. in ITA No.653/Coch/2019 & 4/Coch/2020 dated 19.5.2020 and by the coordinate bench of Bangalore in the case of Mr. Asrah Nafisa Althaf in ITA No.614/Bang/2023 dated 9.11.2023. In view of this, we dismiss these grounds taken by the assessee. 11. Next ground No.6 of the assessee's appeal, which reads as follows: 6. The learned CIT(A) erred in disallowing a sum of Rs. 46,51,037/- towards the expenditure incurred in decommissioning the dismantling is towards capital assets and such expenditure is capital in nature. 11.1 Facts of the issue are that the assessee has incurred expenditure in de-commissioning and dismantling and the same has been claimed as revenue expenditure. However, the lower authorities treated it as a capital expenditure and disallowed the same. 12. The ld. A.R. submitted that the asset de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled to deduct tax and remit the same before the specified due date, it was proposed to disallow the corresponding payments (of Rs. 2,43,81,732/- + Rs. 5,87,05,736 = 8,30,87,468/-) as mentioned below in accordance with the provisions of section 40(a)(ia) of the Act. The AO has observed vis-à-vis payment with respect to professional (Technical fee) . A sum of Rs. 1,69,34,25,237/- is debited towards Transmission charges and Rs. 26,73,57,259/- is debited towards SLDC Charges (UI Charges to SPPCC). As no TDS has been deducted in respect of the said payments as required under the provisions of the Act, it is proposed to disallow the said payments in accordance with the provisions of section 40a(ia) of the Act. The assessee was asked to submit the details of the said payments. 15.2 The assessee's explanation that no TDS is required to be deducted under the provisions of the Income-tax Act 15.3 According to ld. D.R., as per the terms, the functions of the Karnataka Power Transmission Corporation Ltd (KPTCL) are: (a) to undertake transmission of electricity through Intra-State transmission system; (b) discharge all functions of planning and co-ordination relating to intra- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vide its transmission network for the purpose of carrying electricity to its users subject to payment of transmission and other charges as determined by KERC. There is neither an offer nor an acceptance of any "technical service" inter se between the parties. Admittedly, KPTCL is a State owned Company and the only power transmitting agency. It has installed and developed its own infrastructure. Assessee is also a State owned electricity distribution company. The only service which the assessee has availed from the KPTCL is "transmission of power" on payment of charges fixed by KERC. No material is placed by the Revenue before High Court to substantiate its contention that assessee had availed of any technical services. In High Court considered view, assessee has done nothing more than transmitting certain quantum of power from one place to the other for a price fixed by KERC. Assessee was oblivious to the technical expertise which the KPTCL may possess. There was neither transfer of any technology nor any service attributable to a technical service offered by the KPTCL and accepted by the assessee. Therefore, application of Section 194J of the Act to the facts of this case by the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 78,52,08,882/-. The explanation submitted during the discussion that a reversal entry to the extent of Rs. 34,36,15,915/- was made relating to earlier years found to be not acceptable. As the above mentioned consumers grants and also government grants were received during the year to meet the cost of assets, it was proposed to reduce the said aggregate amount of Rs. 93,37,96,236/-. It was therefore proposed to reduce the said amount from the cost of plant and machinery for determining depreciation u/s 32 for which the assessee vide its letter dated 11.2.2013 stated that there is error in reducing the amount of consumer contribution from the gross assets occurred due to the rectification entry passed. Since the omission in deducting Rs. 19,98,49,469/- from the cost of assets inadvertently happened, assessee company agreed for deducting the same from the cost of fixed assets for determining the depreciation u/s 32 of the Act. Considering the aggregate amount of grants and contributions received during the year and considering the assessee's explanation, excess depreciation claimed against the said difference grants of Rs. 34,36,15,915/-, which works out to Rs. 2,57,71,194/- (bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,194/-. The error crept in the computation of the gross block of assets has been correctly rectified by the ld. AO while framing assessment and we do not find any infirmity in the order of the lower authorities on this count and the same is confirmed in computing the actual cost of assets to be arrived by deducting the grant-in-aid received by the assessee as per section 43(1) of the Act. More so, this ground was not pressed before ld. AO, now it cannot press the same. This ground of appeal of the assessee is dismissed. 21. Next ground No.11 of the assessee's appeal, which reads as follows: "11. The learned C1T (A) failed to appreciate that the appellant had rightly claimed the depreciation on assets not in use. The Assessing Officer ought to have appreciated that once the asset is put to use the depreciation is allowable till such time the asset continues to be in the block of assets till the same is disposed off and as such continue to be eligible for allowance of depreciation." 21.1 Facts of the case are that in the balance sheet in Schedule 7 the current assets include the Assets Not in Use aggregating to Rs. 19,88,37,529/- [WDV of obsolete / scrapped assets (A/c code 16.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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