2021 (3) TMI 1360 - AT - Income Tax

Tribunal emphasizes verifying unpaid service tax deduction before invoking section 43B

The Tribunal allowed the Revenue's appeal for statistical purposes, emphasizing the need to verify if the unpaid service tax was claimed as a deduction ... Unpaid service tax - addition u/s 43B - assessee contended that the service tax unpaid was never claimed as an expenditure / deduction in the profit and loss account warranting disallowance u/s 43B - whether it has claimed as deduction in the profit and loss account was never examined by the AO and the CIT(A) without giving an opportunity to the A.O. by placing reliance on the additional evidence allowed the appeal of the assessee? - HELD THAT:- AR does not have any grievance for remitting the issue to the A.O. to examine whether the unpaid service tax has been claimed as a deduction in the profit and loss account. This issue is restored to the files of the A.O. The A.O. is directed to examine whether the assessee had claimed the unpaid service tax as an expenditure / deduction in the profit and loss account. In the event the same is not claimed as a deduction / expenditure, the A.O. shall not invoke the provisions of section 43B in view of the judgment in the case of CIT v. Knight Frank (India) Pvt. Ltd. [2016 (8) TMI 1096 - BOMBAY HIGH COURT] - Appeal filed by the Revenue is allowed for statistical purposes. Issues:1. Justification of deletion of addition under section 43B of the Income Tax Act.2. Compliance with Rule 46A of the Income Tax Rules, 1962.Analysis:1. The appeal was against the CIT(A)'s order concerning the deletion of an addition of Rs. 4,35,91,191 under section 43B of the Income Tax Act for the assessment year 2012-2013. The assessee, engaged in transport, trading, and retail, contended that the unpaid service tax was not claimed as an expenditure in the profit and loss account, citing a judgment of the Bombay High Court. The CIT(A) relied on this judgment and deleted the addition. The Revenue challenged this decision, arguing that the CIT(A) did not comply with Rule 46A of the Income Tax Rules. The Tribunal directed the Assessing Officer (A.O.) to examine whether the unpaid service tax was claimed as a deduction in the profit and loss account before invoking section 43B, following the Bombay High Court judgment. The appeal by the Revenue was allowed for statistical purposes.2. The Revenue contended that the CIT(A) did not comply with Rule 46A of the Income Tax Rules, 1962, as the A.O. was not given an opportunity to verify if the unpaid service tax amount was claimed as a deduction in the profit and loss account. The Tribunal acknowledged this argument and ordered the issue to be remitted to the A.O. for examination. The A.O. was directed to determine if the unpaid service tax was claimed as an expenditure in the profit and loss account. If not claimed, the A.O. was instructed not to invoke section 43B of the Income Tax Act. This decision was based on the judgment of the Bombay High Court. The Tribunal allowed the appeal by the Revenue solely for statistical purposes.In conclusion, the judgment addressed the justification for deleting an addition under section 43B of the Income Tax Act and the compliance with Rule 46A of the Income Tax Rules, 1962. The Tribunal emphasized the importance of verifying whether the unpaid service tax was claimed as a deduction before making additions, in line with the Bombay High Court judgment. The appeal by the Revenue was allowed, and the matter was remitted to the A.O. for further examination, ensuring adherence to the prescribed rules and legal precedents.