Tribunal allows appeal on Cenvat credit write off as valid deduction under Income-tax Act

The Tribunal allowed the appeal, stating that the write off of Cenvat credit was an allowable expenditure under section 37(1) of the Income-tax Act when debited in the books of accounts. The decision emphasized the assessee's right to claim the deduction in the chosen year, which was considered valid in this case. Previous judicial decisions, including the Hyderabad Bench's ruling, supported the validity of the claim for service tax write off as a deduction.

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Issues: Claim of service tax write off as a deduction under the Income-tax Act.

Analysis:
The appeal was filed against the order of CIT(A)-37, New Delhi, related to the assessment year 2012-13 concerning the claim of service tax write off amounting to Rs. 22,73,576. The Assessing Officer disallowed the claimed amount, adding it to the assessee's income, stating that the transaction did not entitle the deduction under the Income-tax Act. The CIT(A) noted that the time limit for availing Cenvat Credit had been extended, implying that the receiver of service could avail input tax credit without any specific time limit. The assessee contended that the service tax paid was to be set off against the service tax receivable, following which, if service tax was not recoverable, it was debited in later years. The assessee relied on judicial decisions to support its claim. The Revenue argued that service tax recoverable for services rendered could be set off in subsequent years. The Tribunal held that the claim of deduction on account of service tax paid but debited during the year was allowable under section 37(1) of the Act. The Tribunal emphasized that the assessee was entitled to make the claim in the year of its choice, and in this case, the claim made in the relevant year was deemed valid. The Tribunal referred to previous decisions, including the Hyderabad Bench's ruling, to support its decision. Consequently, the grounds raised by the assessee were allowed, and the appeal was granted in favor of the assessee.

In conclusion, the Tribunal allowed the appeal, emphasizing that the write off of Cenvat credit was an allowable expenditure under section 37(1) of the Income-tax Act when debited in the books of accounts. The decision was based on the principle that the assessee had the liberty to claim the deduction in the year of its choice, and in this instance, the claim made in the relevant year was deemed legitimate. The Tribunal's ruling was supported by previous judicial decisions, including the Hyderabad Bench's decision, establishing the validity of the claim for service tax write off as a deduction.

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