ITAT upholds CIT(A) decisions for AY 2014-15, allows Service Tax, partially accepts food expenses

The ITAT dismissed the Revenue's appeal, upholding the decisions of the ld. CIT(A) for Assessment Year 2014-15. The disallowance of Rs. 40,45,470 claimed as Service Tax payment was deleted, clarifying that it was an allowable liability for the assessee. Additionally, the disallowance of Rs. 4,07,09,028 for consumption of food and beverages was partially accepted, with a sustained addition of Rs. 2,03,54,514. The ITAT acknowledged the challenges in maintaining quantitative details for perishable items and declined to interfere with the upheld disallowance amount. The judgment was pronounced on 01.09.2022.

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Issues:
1. Disallowance of Service Tax claimed in profit and loss account.
2. Disallowance on account of rejection of consumption of food and beverages claimed.

Issue 1: Disallowance of Service Tax claimed in profit and loss account

The appeal by the Revenue was against the order of the ld. CIT(A) pertaining to Assessment Year 2014-15. The Assessing Officer disallowed Rs. 40,45,470 claimed as Service Tax payment by the assessee, stating that there was no mention in the Notes to the Accounts regarding collection or payment of Service Tax. The ld. CIT(A) deleted the addition, noting that Service Tax payment was an allowable liability for the assessee, not collected from customers. The ITAT found that the Assessing Officer misunderstood the Notes to the Accounts, clarifying that Service Tax liability is on the assessee and not collected from customers. Consequently, the ITAT upheld the decision of the ld. CIT(A) and dismissed Ground No. 1.

Issue 2: Disallowance on account of rejection of consumption of food and beverages claimed

The Assessing Officer disallowed Rs. 4,07,09,028 due to the assessee's alleged failure to maintain or furnish quantitative details or stock register for consumed goods. The ld. CIT(A) partially accepted the assessee's explanation, limiting the disallowance to 10% of consumption of foods and beverages, resulting in a sustained addition of Rs. 2,03,54,514. The ITAT observed the nature of the assessee's business, acknowledging the challenges in providing quantitative details for perishable items purchased daily. Considering the ld. CIT(A)'s decision and the nature of the business, the ITAT declined to interfere with the upheld disallowance amount. Consequently, Ground No. 2 was also dismissed.

In conclusion, the appeal of the Revenue was dismissed by the ITAT, upholding the decisions of the ld. CIT(A) on both issues regarding the disallowance of Service Tax claimed in the profit and loss account and the rejection of consumption of food and beverages claimed. The judgment was pronounced on 01.09.2022.

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