Section 43B applies to unpaid service tax liability, with allowance available in the year of actual payment.

Service tax collected but not remitted by the due date was treated as a statutory liability falling within section 43B, and the fact that it was not routed through the profit and loss account did not alter that treatment. Section 145A was held not to override section 43B. The assessee's alternative claim succeeded to the extent that the amount was allowable in the year of actual payment. On the brought-forward loss issue, no further interference was required because verification had already been directed in accordance with law.

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Issues: (i) Whether service tax collected by the assessee but not remitted to the Government before the due date for filing the return could be disallowed under section 43B and brought to tax even though it was not routed through the profit and loss account, and whether section 145A could override that treatment. (ii) Whether the disallowance affecting brought forward loss required any further interference when the appellate authority had already directed verification in accordance with law.

Issue (i): Whether service tax collected by the assessee but not remitted to the Government before the due date for filing the return could be disallowed under section 43B and brought to tax even though it was not routed through the profit and loss account, and whether section 145A could override that treatment.

Analysis: The collected service tax was treated as a statutory liability payable to the Government, and the failure to remit it before the due date attracted section 43B. The fact that the amount was not claimed as an expenditure in the profit and loss account did not alter its character for the purpose of disallowance. The Tribunal also held that section 145A could not displace the operation of section 43B because of the latter's overriding effect. At the same time, the assessee's alternative plea that the amount should be allowed in the year of actual payment was accepted.

Conclusion: The disallowance under section 43B was upheld, but the assessee was granted relief by directing allowance in the year of actual payment, so the issue was partly decided in favour of the assessee.

Issue (ii): Whether the disallowance affecting brought forward loss required any further interference when the appellate authority had already directed verification in accordance with law.

Analysis: The claim was treated as consequential, and the appellate authority had already directed the Assessing Officer to verify the brought forward losses and deal with them in accordance with law. No separate further direction was found necessary.

Conclusion: No further interference was called for on this issue.

Final Conclusion: The appeal succeeded only to the limited extent of allowing the service tax liability in the year of actual payment, while the remaining treatment of the addition was sustained and the loss-related issue was left to verification as directed.

Ratio Decidendi: A statutory liability such as service tax, when collected but not remitted by the due date, attracts section 43B even if not debited to the profit and loss account, and the amount may be allowed in the year of actual payment.

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