Section 43B of the Income Tax Act

[Amit Sharma]

My query is related to section 43B of the Income Tax Act which states that certain payments of liabilities shall be allowed on actual payment basis irrespective of method of accounting employed.

My query is that whether the Assessing Officer can disallow any tax liability which has not been debited in Profit and Loss Account?

For example if a service provider have outstanding output service tax liability as on 31st March and the same has not been paid on or before due date of filing of returns then can Assessing Officer make addition even the same has not been routed through profit and loss account?

[CA Rachit Agarwal]

Dear Anilji

Please also refer Section 145A according to which income should be inclusive of "tax, duty, cess or fee". Hence output tax should be include in the value of services for the computation of income and at arriving at Net Profit. According to which Output Service Tax should have included in the sales, deduction would be allowed on payment basis.

Therefore Assessing Office is right in making addition even if the output service tax is not passed through PL.

You will be eligible for deduction when the output service tax has been paid.

Regard

Rachit Agarwal,

[email protected]

 

[PANKAJ GROVER]

Dear Amit

Expenses which was otherwise allowable can be disallowed by AO u/s 43B, service tax, vat, excise duty for part of p&l irrespective of the method of accounting. Therefore AO can disallow service tax even though the same has not been passed through p&l account. Further TDS liability can not be disallowed by AO because the same is otherwise not allowable as expenses.

 

 

AI Summary

Payment-based deduction: unpaid service tax can be disallowed until actually paid, even if not recorded in profit and loss.
Liabilities subject to the payment-based deduction rule must be disallowed for tax purposes until actually paid even if not charged to the profit and loss account; output service tax forms part of the transaction value for income computation but its deduction is contingent on payment, and withheld tax obligations are treated differently under their specific deductibility rules.