Income Tax Tribunal: Section 43B Not Applicable to Delayed Service Tax Payment

The Tribunal held that Section 43B of the Income Tax Act did not apply to the delayed payment of service tax as the assessee did not claim any deduction for the service tax in the Profit & Loss Account. Therefore, the addition of Rs. 25,40,376/- was deleted. Regarding the disallowance of interest on late payment of service tax, since the interest was not claimed as a deduction, it could not be added to the total income under Section 43B. The appeal was partly allowed, with the addition under Section 43B deleted and the interest issue dismissed as infructuous.

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Issues Involved:
1. Applicability of Section 43B of the Income Tax Act, 1961, on delayed payment of service tax.
2. Disallowance of interest on late payment of service tax under Section 43B.

Detailed Analysis:

Issue 1: Applicability of Section 43B on Delayed Payment of Service Tax
The primary issue raised by the assessee was whether the provisions of Section 43B of the Income Tax Act, 1961, apply to the delayed payment of service tax amounting to Rs. 25,40,376/-. The assessee argued that since the service tax was neither debited to the Profit & Loss Account nor claimed as a deduction in computing total income, Section 43B should not apply.

Facts and Arguments:
- The assessee, a private limited company engaged in civil construction services, showed a service tax liability of Rs. 52,58,086/- as of 31 March 2013, with Rs. 25,40,376/- paid after the due date for filing the income tax return.
- During assessment, the assessee claimed that the service tax collected from customers was paid to the government subsequently and was shown as a liability in the books without claiming any deduction. Hence, Section 43B should not be applicable.
- The Assessing Officer (AO) disagreed, treating the unpaid service tax as income under Section 43B, adding Rs. 25,40,376/- to the total income.

CIT(A) Decision:
- The CIT(A) upheld the AO's decision, treating the unpaid service tax as trading receipts and relying on several judgments, including Madhya Gujarat Vij Co. Ltd. Vs ITO and CIT v Sunder Printing Press.

Tribunal's Analysis:
- The Tribunal noted that the CIT(A) relied on the Supreme Court judgment in Chowringhee Sales Bureau (Pvt.) Ltd. Vs. CIT, which was not rendered in the context of Section 43B.
- The Tribunal highlighted that the Delhi High Court in CIT vs. Noble & Hewitt (I)(P) Ltd. clarified that if the service tax is not debited to the Profit & Loss Account, Section 43B is not applicable.
- The Tribunal further noted that the provisions of Section 145A, which mandate including tax in the turnover, do not apply to service tax.

Conclusion:
- The Tribunal concluded that since the assessee did not claim any deduction for the service tax in the Profit & Loss Account, Section 43B does not apply. Therefore, the addition of Rs. 25,40,376/- was deleted.

Issue 2: Disallowance of Interest on Late Payment of Service Tax
The second issue was the disallowance of Rs. 1,61,905/- as interest on late payment of service tax.

Facts and Arguments:
- The assessee paid the service tax along with interest in the financial year 2014-15.
- The assessee argued that the interest was not claimed as a deduction, and thus, Section 43B should not apply.

Tribunal's Analysis:
- The Tribunal noted that the interest amount was not claimed as a deduction in the year under consideration.
- The Tribunal also observed that the interest amount was already included in the service tax amount discussed in the first issue.

Conclusion:
- The Tribunal held that since the interest was not claimed as a deduction, it could not be added to the total income under Section 43B. The ground of appeal regarding the interest became infructuous and was dismissed.

Final Judgment:
The appeal of the assessee was partly allowed. The addition of Rs. 25,40,376/- under Section 43B was deleted, while the ground of appeal regarding the interest on late payment of service tax was dismissed as infructuous.

Order Pronounced:
- The order was pronounced in the Court on 01/10/2019 at Ahmedabad.

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