ITAT Jaipur allows appeal, deletes service tax disallowance under Section 43B.

The ITAT, Jaipur, partially allowed the appeal by deleting the disallowance of service tax under Section 43B of the Income Tax Act, 1961. The appellant's adherence to the mercantile system of accounting and non-debiting of service tax in the Profit and Loss account led to the deletion of the addition. However, the disallowance of expenses on repairs, maintenance, and other miscellaneous items was not addressed in detail as the appellant did not pursue those grounds during the appeal, resulting in their dismissal.

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Issues:
1. Disallowance of service tax under Section 43B of the Income Tax Act, 1961.
2. Disallowance of expenses on repairs, maintenance, and other miscellaneous items.

Issue 1: Disallowance of service tax under Section 43B of the Income Tax Act, 1961:
The appeal involved the disallowance of service tax under Section 43B of the Income Tax Act, 1961. The Assessing Officer made an addition of Rs. 60,08,570 in the income of the assessee due to non-payment of service tax before the due date of filing the return. The ld CIT(A) confirmed the addition but reduced it to Rs. 49,65,614 based on the appellant's admission of liability to pay service tax before the due date. The appellant contended that service tax liability arises only after receiving payment for services, and therefore, the unpaid service tax should not be disallowed under Section 43B. The appellant cited various judicial decisions to support this argument. The ITAT, Jaipur, held that since the service tax was not debited in the Profit and Loss account and the appellant followed the mercantile system of accounting, no addition could be made under Section 43B. The ITAT relied on decisions of the Delhi High Court and the Bombay High Court to delete the addition confirmed by the ld CIT(A).

Issue 2: Disallowance of expenses on repairs, maintenance, and other miscellaneous items:
The appeal also addressed the disallowance of expenses amounting to Rs. 1,09,577 on repairs, maintenance, generator set running, miscellaneous items, staff welfare, festival, and entertainment expenses. The ld CIT(A) sustained this disallowance, which the appellant argued was excessive and unjustified. However, the appellant did not press Ground Nos. 3 and 4 of the appeal related to these expenses, leading to their dismissal as not pressed. Consequently, the ITAT did not delve into the details of these disallowances due to the appellant not pursuing these grounds during the appeal.

In conclusion, the ITAT, Jaipur, partially allowed the assessee's appeal by deleting the addition of service tax disallowed under Section 43B of the Income Tax Act, 1961, based on the appellant's adherence to the mercantile system of accounting and non-debiting of service tax in the Profit and Loss account. The disallowance of expenses on repairs, maintenance, and other miscellaneous items was not addressed in detail due to the appellant not pressing those grounds during the appeal process.

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