Section 43B disallowance upheld for unpaid service tax despite separate accounting treatment of the statutory liability.

Unpaid service tax was held disallowable under section 43B because it constituted a statutory tax liability remaining unpaid within the prescribed time. The assessee's separate accounting of service tax and contention that no corresponding amount was debited to the profit and loss account did not take the unpaid sum outside the provision. The Tribunal noted that the service tax obligation had arisen under the applicable tax regime and had to be reflected as a statutory due, and it found the cited precedents distinguishable on the facts because the legal position on service tax liability had changed. The disallowance was therefore upheld against the assessee.

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Issues: Whether the unpaid service tax payable by the assessee could be disallowed under section 43B of the Income-tax Act, 1961.

Analysis: The assessee had credited service tax separately and contended that no corresponding expenditure was debited to the profit and loss account. The Tribunal held that the liability to pay service tax had arisen under the applicable service tax regime and the amount remaining unpaid at the end of the year represented a statutory sum payable by way of tax. It further held that the assessee was required to account for the turnover and related statutory dues in accordance with the governing provisions, and that the mere separate accounting treatment of service tax did not take the unpaid amount outside the scope of section 43B. The Tribunal also found that the cited precedents did not assist the assessee on the facts because the legal position regarding service tax liability had changed.

Conclusion: The disallowance under section 43B was upheld and the issue was decided against the assessee.

Ratio Decidendi: A statutory liability in the nature of tax remaining unpaid within the prescribed time is disallowable under section 43B notwithstanding the assessee's separate accounting treatment of that liability.

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