Tribunal rules disallowance of service tax liability not justified under Section 43B

The Tribunal upheld the CIT(A)'s decision, ruling that disallowance of outstanding service tax liability under Section 43B was not justified as the liability was not reflected in the Profit and Loss Account. The Tribunal dismissed the revenue's appeal, affirming the CIT(A)'s order.

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Issues:
1. Disallowance of outstanding service tax liability under Section 43B of the Income Tax Act, 1961.

Analysis:
The appeal pertains to the assessment year 2013-14 and concerns the disallowance of outstanding service tax liability of Rs. 1,89,52,413 by the Assessing Officer under Section 43B of the Act. The Assessing Officer found that the assessee had only paid Rs. 13,00,000 of the total liability before the due date of filing the income tax return. The assessee contended that since the service tax liability was not routed through the Profit and Loss Account, Section 43B was not applicable. However, the Assessing Officer maintained that the liability must be added back to the total income as per Section 43B, regardless of whether it was reflected in the Profit and Loss Account.

The Commissioner of Income Tax (Appeal) (CIT(A)) deleted the addition made by the Assessing Officer, citing that since the service tax liability was not debited in the Profit and Loss Account, disallowance under Section 43B could not be justified. The CIT(A) directed the Assessing Officer to verify if the difference in the settled service tax liability in subsequent years had been offered for taxation. The Tribunal upheld the CIT(A)'s decision, emphasizing that no disallowance could be made under Section 43B as the service tax liability was not reflected in the Profit and Loss Account. The Tribunal declined to interfere with the CIT(A)'s order, dismissing the revenue's appeal.

In conclusion, the Tribunal upheld the CIT(A)'s decision, ruling that the disallowance of the outstanding service tax liability under Section 43B was not justified as the liability was not accounted for in the Profit and Loss Account. The Tribunal dismissed the revenue's appeal, affirming the CIT(A)'s order.

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