TaxTMI 
TaxTMI 
TaxTMI 
2020 (2) TMI 80
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....ent which is against the appellant is opposed to law, weight of evidence, probabilities, facts and circumstances of the Appellant's case. 2. The appellant denies itself liable to be assessed on a total income determined by the learned assessing officer amounting to 58,17,228/ - and confirmed by the learned Commissioner of Income-tax [Appeals], as against the income reported by the appellant of Rs NIL the facts and circumstances of the case. 3. The provisions of section 145A applies only in respect of valuation purchase and sale of goods and inventory and not to service contracts for all transaction prior to 01/04/2017 (FA 2018). 4. The provisions of section 145A cannot be invoked for adding service tax to gross receipts (i.e., service tax cannot be included as part of trading receipts under section 145A of the Income Tax Act, 1961) for AY 2014- 15. 5. The unpaid service tax liability cannot be disallowed under section 43B of the Income Tax Act, 1961, when the same is not claimed as expense in P&L account? 6. The learned officer has failed to appreciate the fact that the Service Tax amount has not been passed through the Profit & Loss Account and the same has not been ....
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....), who confirmed the order of the Assessing Officer. 5. Aggrieved by the orders of the Income Tax Authorities, the assessee is in appeal before the Tribunal. 5.1 The learned AR filed a detailed submission and also reiterated the submissions made before the Income-tax authorities and also supported the grounds of appeal raised by it. The learned AR also relied on the following judgments / orders:- (i) CIT v. Noble & Hewitt (I)(P) Ltd. [(2008) 166 Taxman 48 (Delhi). (ii) Pharma Search v. ACIT [(2012) 21 taxmann.com 44 (Mum.). (iii) CIT v. Knight Frank (India) (P) Ltd. [(2016) 72 taxmann.com 300 (Bombay)] (iv) Shri N.R.Kumaraswamy v. ACIT [ITA No.1778/ Bang/2017 - order dated 31.05.2018] (v) Envision Enterprise Solutions P. Ltd. v. ITO [ITA No.315/Hyd/2016 - order dated 12th August, 2016] (vi) CIT v. Vatika Township (P.) Ltd. [(2014) 49 taxmann.com 249 (SC)] 5.2 The learned Departmental Representative, on the other hand, submitted that the assessee has collected the service taxes and not paid to the Government exchequer till the due date of filing of return of income. Hence, it is to be treated as income of the assessee to be assessed for the assessment year under consi....
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....vice tax and not remitted the same to the Government exchequer, before the due date of filing of the return of income. As such, the issue whether the provisions of section 43B of the I.T.Act applies to service tax, which is not paid before the due date of filing of the return. It was considered by the co-ordinate Bench of the ITAT, Hyderabad Benches in the case of M/s.Bartronics India Ltd. v. ACIT [ITA No.2188 and 2189/Hyd/2011 - order dated 31.05.2012] that when the assessee has not paid the service tax as required under the provisions of section 43B, which is also very much covered u/s 43B of the I.T.Act. The provisions of section 43B of the Act is very clear and it states that "any sum payable by the assessee by way of tax, duty, cess or fee, by whatever name called, under any law for the time being in force". Therefore, even the service tax is liability which covers u/s 43B of the Act and non-payment of the same within the stipulated time as specified u/s 43B of the Act attracts disallowance. Now the question is that when the assessee has not claimed it as expenditure in the profit and loss account, could it be disallowed u/s 43B of the Act. This was considered by the Hon'ble A....
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....e 6 of Service Tax Rules, 1994, the service tax becomes payable only on receipt of service tax from the client. Therefore, the amount of service tax included in bills but not received could not be disallowed under s. 43B'. After analysing the relevant provisions of Incometax Act as well as Service Tax Act, the Tribunal had, further, recorded its findings as under: "12...............................................................From a plain reading of the above provision it becomes clear that the rigour of this provision would be attracted only in a case where an item is allowable as deduction but because of the failure to make payment such deduction will not be allowed. It can be argued that in the case of ST also the assessee does not claim deduction since it has been held 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 profess....
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....ment exchequer within the due date of filing of return. Since service tax realised is included in the total income, the same is to be allowed as a deduction in the year it is paid to the Government account. In the instant case, this is what has been done by the learned CIT(A). The CIT(A) had allowed the alternative plea of the assessee and had directed the Assessing Officer to deduct the service tax when the payment is made to the Govt. account in the subsequent year. Therefore, we find there is no merit in the contention raised on behalf of the assessee and this issue is decided against the assessee. It is ordered accordingly." 6.1 Further, in the case of M/s.Hemkunt Infratech (P) Ltd. v. DCIT [ITA No.6683/Del/2017 - order dated 23.03.2018], the Delhi Benches of the Tribunal held as under:- "6. After hearing both the sides and perusing the entire material available on record, we observe that there is a credit balance of Rs. 1,16,09,924/- at the end of the year towards expenses payable. The assessee submitted that it is service tax liability, which arose due to crediting the service tax received from the service recipients. The assessee has challenged before us, the disallowan....
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....ning the income chargeable under the head profits and gains of business or profession, it has been provided that the said valuation would be in accordance with the method of accounting regularly employed by the assessee i.e. either mercantile or cash. Further, adjustment is to be made to include the amount of any tax, duties, cess or fees, by whatever name called, actually paid or incurred by the assessee to bring the goods to the place of its location and condition, as on the valuation date. In other words, where any expenditure is actually paid or incurred by the assessee by way of any tax, duties, cess or fees, by whatever name called, then adjustment is to be made both in the valuation of purchase and sale of goods and also in the valuation of inventory to include the aforesaid amounts while determining the income chargeable under head profits and gains of business or profession. The assessee has separately accounted for the service tax collected is also the indirect part of turnover because it is received along with turnover. The assessee has not shown any invoice raised by him before us as per service tax Rules, which is mandatory for the service provider to issue invoice to ....
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....espect of capital goods shall be allowed immediately on receipt of the capital goods in the factory of a manufacturer. Provided also that where an assessee is eligible to avail of the exemption under a notification based on the value of clearances in a financial year, the CENVAT credit in respect of capital goods received by such assessee shall be allowed for the whole amount of the duty paid on such capital goods in the same financial year. Explanation.- For the removal of doubts, it is hereby clarified that an assessee shall be "eligible" if his aggregate value of clearances of all excisable goods for home consumption in the preceding financial year computed in the manner specified in the said notification did not exceed rupees four hundred lakhs. (b) The balance of CENVAT credit may be taken in any financial year subsequent to the financial year in which the capital goods were received in the factory of the manufacturer, or in the premises of the provider of output service, if the capital goods, other than components, spares and accessories, refractories and refractory materials, moulds and dies and goods falling under heading 6805, grinding wheels and the like, and parts ....
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.... to his specifications. (6) The Deputy Commissioner of Central Excise or the Assistant Commissioner of Central Excise, as the case may be, having jurisdiction over the factory of the manufacturer of the final products who has sent the input or partially processed inputs outside his factory to a job-worker may, by an order, which shall be valid for a financial year, in respect of removal of such input or partially processed input, and subject to such conditions as he may impose in the interest of revenue including the manner in which duty, if leviable, is to be paid, allow final products to be cleared from the premises of the job-worker. (7) The CENVAT credit in respect of input service shall be allowed, on or after the day which payment is made of the value of input service and the service tax paid or payable as is indicated in invoice, bill or, as the case may be, challan referred to in rule 9. 9. As per Rule 6(1) of the Service Tax Rules, 1994, in case of company, service tax is to be paid on a monthly basis by 5th of the following month (in case of e-payment, by 6th of the month immediately following the respective month). However, the payment for the month of March is req....
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....ayable by the person on finalisation of assessment or any other proceeding for determination of service tax relating to the taxable service referred to in sub-section (1). (6) Where any surplus amount is left after the adjustment under subsection (5), such amount shall either be credited to the Consumer Welfare Fund referred to in section 12C of the Central Excise Act, 1944 or, as the case may be, refunded to the person who has borne the incidence of such amount, in accordance with the provisions of section 11B of the said Act and such person may make an application under that section in such cases within six months from the date of the public notice to be issued by the Central Excise Officer for the refund of such surplus amount.] 12. We further observe that the point of taxation as per Rule 3 of Point of Taxation Rules, 2011 is as under : RULE 3. Determination of point of taxation. - (Notification No. 18/2011- ST dt. 01.03.2011 as amended). For the purposes of these rules, unless otherwise provided, point of taxation shall be,- (a) the time when the invoice for the service provided or agreed to be provided is issued : Provided that where the invoice is not issued with....
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....ts turnover inclusive of service tax received. The assessee cannot be exonerated from its liability by saying that he accounted for the service tax received separately. Since the assessee did not pay service tax as contemplated u/s. 43B(a) and as per above provisions of Service Tax Act within the stipulated time, therefore, the ld. CIT(A) has rightly disallowed the same u/s. 43B of the IT Act. The case laws relied by the assessee are based on different footings as in all the decisions it was held that Service Tax was not at all payable because the service Tax was not received from the customer. The law prevailing at that particular time was that Service Tax was to be paid to the Government only when Service Tax is received from the service receiver to the service provider. Subsequently, there is change in the law which provides that Service Tax is to be deposited by the service provider even if service tax is not paid by the service receiver to the service provider. Therefore, in all those decisions it was held that service tax outstanding is hit by the provisions of Section 43B of the Income Tax Act. 1961. Due to the change in the law now those decisions does not help to the ass....