TaxTMI 
TaxTMI 
TaxTMI 
2013 (4) TMI 842
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....A) had also erred in confirming the AO's stand in treating the service liability of Rs. 29,00,660/- outstanding as income of the assessee for the current year. 3. Briefly stated, the facts of the issues are as under: The assessee firm, engaged in the profession of chartered accountancy, had furnished its return of income, admitting a total income of Rs. 76,78,230/-. The assessee firm is following mercantile system of accounting. During the course of assessment proceedings, the assessee was required to reconcile the AIR information in respect of professional/technical service fees of Rs. 4,85,320/- received from M/s OPUS International (M) Berhad. According to the AO, since the assessee was following mercantile system of accountancy, the same should have been offered to tax in the AY under consideration, instead of assessment year 2010-11. When the assessee was countered with the above proposition, according to the AO, the assessee came forward to disclose the same and, thus, Rs. 4,85,320/- was brought to tax. The AO had, further, noticed that Rs. 29,00,660/- being service tax collected by the assessee was not paid, but, the same was shown as outstanding liability. After due conside....
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.... is includible in the total income. The appellant's plea that sales tax is different from service tax cannot be accepted in the present case as what the appellant as a firm of Chartered Accountants is selling is services and not goods, so the tax applicable is service tax which stands on the same footing as sales tax in terms of services rendered as sales tax holds for goods sold. The AO has also pointed out that this amount is included as business receipts in TDS Certificates also, clearly showing that it should have been included in the receipts, failure to do which has caused short declaration of income to this extent. The action of the AO is correct and is upheld." 4.2 Considering the assessee's further plea that in the event of the addition made by the AO being sustained, directions be given to the AO not to tax the same amount in the AY 2010-11 in which year the assessee had offered the same amount to tax etc., the CIT (A) had observed thus: "4.7..........................I agree with the appellant's contention to the extent that the same amount cannot be taxed twice. As a corollary to the addition sustained for the assessment year 2009-10, necessary relief for the assessm....
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....referred any claim towards service tax and that when a claim was not referred, the question of applicability of disallowance u/s 43B of the Act does not arise; Relies on the case laws: * CIT v. Noble and Hewitt India (P) Ltd 305 ITR 324 (Del); * ACIT v. Real Image Media Technologies (P) Ltd 306 ITR 106 - ITAT, Chennai; & * DCIT v. Manish M Chheda 29 SOT 138- Mumbai ITAT (ix) that by no stretch of imagination, service tax collected by the assessee from its customers is considered as a benefit or income for the purpose of taxation. A service provider merely acts as an agent of the Government by collecting the service tax from the customers and remitting the same in accordance with the provisions governing service tax; that the fact that the service provider acts merely as an agent of the Government is indirectly held in the case of ACIT v. Real Image Medial Technologies (P) Ltd supra and, hence, none of the conditions laid down as mentioned above are satisfied negating the rationale of the AO. In conclusion, it was pleaded that - (i) that suitable directions be given to the AO to rectify the order of the subsequent assessment year i.e., 2011-12 for reducing the revenue ....
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....ated 29.7.2010 along with financial statements; & (iii) Invoice raised on OPUS International (M) Berhad - Indian Project office for the service for the previous year (AY 2009-10) dt.30.8.2010 [Courtesy: P 169 - 184 - PB AR] 7.1.1 Taking into account the facts and circumstances of the issue, the affidavit in which it was categorically vouched for not given any consent for the alleged addition and also the principles of natural justice and fairness, the issue is remitted back to the file of the AO with a specific direction to look into issue afresh and to take appropriate action in accordance with the provisions of the Act after affording a reasonable opportunity to the assessee to put-forth its views. It is ordered accordingly. (ii) Unpaid service tax: Rs. 29,00,660/-: 7.2 During the course of assessment proceedings, the AO observed that a sum of Rs. 29 lakhs representing service tax collected by the assessee had not been paid, but, was shown as 'outstanding liability'. Being queried, it was explained that it had not preferred any claim for deduction and, thus, it was argued, the question of disallowance u/s 43B of the Act does not arise. The AO took a view that even th....
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....ld that non-payment of Sales-tax would attract provisions of section 43B, but that is being done on the basis of the principles laid down by the Hon'ble Supreme Court in the case of Chowranghee Sales Bureau Ltd. V CIT 110 ITR 385 that Sales-tax is part of the trading receipt. Further, section 145A clearly provides that for the purpose of determining income under the head profits and gains of business or profession, the amount of purchase and sales i.e. turnover would include any tax, duty cess or fee. Therefore, the rigour of section 43B may be applicable in the case of Sales-tax or Excise Duty but the same cannot be said to be the position in case of Service-tax because of two reasons. Firstly, the assessee is never allowed deduction on account of service tax which is collected on behalf of the Govt. and paid to the Govt. accordingly. Therefore, a service provider is merely acting as an agent of the Govt. and is not entitled to claim deduction on account of service tax. Hence, on this account alone addition u/s 43B could not be made and the same has been correctly deleted by the CIT(Appeals)". However, in the instant case, as admitted by the assessee, service tax has been collect....