Tribunal directs reexamination of service tax disallowance. PF/ESI contributions allowed as expenditure.

The Tribunal partially allowed the appellant's appeal, directing the Assessing Officer to further examine the revised audit report and relevant documents regarding the disallowance of service tax under section 43B. The disallowance of the employer's and employees' contribution to PF/ESI under section 36(1)(va) was overturned as the contributions were claimed as expenditure and deposited before the due date. The Tribunal set aside the CIT(A)'s decision, allowing the grounds raised by the appellant for both issues.

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Issues Involved:
1. Disallowance of service tax under section 43B of the Income Tax Act, 1961.
2. Disallowance of employer's and employees' contribution to PF/ESI under section 36(1)(va) of the Income Tax Act, 1961.

Analysis:

Issue 1: Disallowance of service tax under section 43B of the Income Tax Act, 1961:
The appellant, a private limited company, filed an e-return of income for the AY 2017-18, which was processed under section 143(1) of the Act by CPC, Bangalore. Disallowances were made under section 43B of the Act, including Rs. 79,701 for service tax. The appellant appealed to the CIT(A) but was unsuccessful. The Tribunal observed discrepancies in the audit report regarding the routing of service tax through the Profit & Loss account. The revised audit report clarified that service tax was not routed through the P & L account. The Tribunal directed the AO to examine the revised report and relevant documents to verify the claim that service tax was not claimed as an expenditure in the P & L account. The ground raised by the assessee was allowed for statistical purposes pending further examination.

Issue 2: Disallowance of employer's and employees' contribution to PF/ESI under section 36(1)(va) of the Income Tax Act, 1961:
The appellant contested the disallowance of Rs. 10,52,714, which included contributions to PF/ESI. Regarding the employer's contribution, it was noted that the amount was claimed as an expenditure in the Profit & Loss account and was deposited before the due date of filing the return of income. As there was no delay in payment before the due date, no disallowance under section 43B of the Act was warranted. The disallowance of the employer's contribution was deleted. Concerning the employees' contribution, the Tribunal relied on precedents and held that since the details were captured in the audit report and the sum was deposited before the due date of filing the return of income, the disallowance under section 36(1)(va) deserved to be deleted. The Tribunal set aside the CIT(A)'s finding and allowed the grounds raised by the assessee.

In conclusion, the appeal of the assessee was partly allowed for statistical purposes based on the specific findings for each issue discussed above.

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