2014 (4) TMI 829

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....e tax had arisen during the previous year relevant to A.Y 200910, without appreciating that the liability had accrued in the F.Ys 200304 to 200607, which had merely been discovered by the Service Tax Department in the previous year relevant to A.Y 200910." {B} "Whether on the facts and in the circumstances of the case and in law, the ITAT was justified in holding that the expenses were not debited as Service-tax and interest thereon but these expenses were incidental and arising out of the assessee's business, without appreciating that the assessee had debited the said expenses in the Profit & Loss Account towards Service Tax and Interest on Service-tax and thereby made an error both in law and in facts. {C} "Whether on the facts and ....

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....unt which, as noted earlier, included the principal liability of service tax with interest thereon. The admitted facts, therefore, were that the assessee deposited the said amount of Rs. 32,44,004/- towards service tax and interest on delayed depositing of service tax from his own pocket, though the primary liability to pay such tax was on the service recipient. However, the assessee having failed to discharge his duty of collecting the same from the service recipient and depositing the same with the Government authorities, had to discharge such liability. The stand of the Revenue before us was that this amount having been expended by the assessee for infraction of law, deduction thereof was not available. We may notice that CIT [A] as w....

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....have direct nexus with the business operation. Therefore, it is allowable u/s. 37 of the IT Act as incurred wholly and exclusively for business purposes. We, therefore, do not found any reason to intervene in the order of the CIT (A). Accordingly, the Revenue's appeal is dismissed." We have no hesitation in upholding the view of the CIT {A}, as confirmed by the Tribunal. The amount was expended by the assessee during the course of business, wholly and exclusively for the purpose of business. If the assessee had taken proper steps and charged service tax to the service recipients and deposited with the Government, there was no question of assessee expending such sum. It is only because the assessee failed to do so, that he had to expend t....