TaxTMI 
TaxTMI 
2024 (8) TMI 1572
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....Company has an outstanding liability of IGST payable on 31.03.2019 at Rs. 1,25,65,813/-. Admittedly, this amount has not been paid before the due date of filing the return of income and in the Tax Audit Report it has been reflected that the alleged sum has not been paid. Based on the observation of the tax auditor, disallowance made in the assessment order framed u/s. 143(1)(a) of the Act and the same was challenged before the Ld. CIT(A). It was contended that IGST has not been routed through P&L Account and, therefore, since no deduction of IGST has been claimed as an expenditure, disallowance u/s. 43B of the Act is uncalled for. Reliance was placed on various decisions. However, Ld. CIT(A) failed to find any merit in this ground and he after referring to section 145 and 145A of the Act stated that the assessee was required to route the IGST through its P&L Account failing which sec. 145A and ICDS-2 on valuation of inventories comes into play and the appellant cannot shift disallowance of IGST payable u/s. 43B of the Act. Relevant finding of the Ld. CIT(A) is reproduced as under: "Now, coming to the issue, where the appellant had not recognized the amount of VAT/GST payab....
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....3B of the Act cannot be invoked. He also placed written note stating that even if the IGST is routed through P&L Account, there is no impact on the net profit/loss of the assessee company. The details filed by the Ld. Counsel for the assessee and the decision referred therein both favourable and against the assessee are mentioned in the Index of the paper book and the same is extracted below: Sr. No Particulars Submitted before Page Nos. AD CIT(A) 1 Copy of Tax Audit Report in Form SCU Med for AY 2019-20 - - 1-21 2 Notes to Tax Audit Report for AY 2019-20 - - 22.56 3 Financial Statements for AY 2019-20 - - 57-117 4 Computation of income for AY 2019-20 - - 118-119 5 Copy of provisions of ICDS-Il - - 120-123 Favorable case laws: 6 Decision in case of CIT vs. Knight Frank (India) (P.) Ltd. (2016) 72 taxmann.com 300 (HC Bom.) - - 124-128 7 Duuision in case of CIT vs. Noble & Hewitt (1) (P.) Ltd. (2008) 156 Taxman 48 (HC Del.) - - 129-130 8 Decision in case of Viiav Associates Wadhwa Construction Pvt. Lid. vs. ACIT (I....
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....e by way of tax, duty, cess or fee by whatever name called, under any law for the time being in force for the same and if such amount not paid before the due date of filing return of income, it needs to be added to the income of the assessee. Section 43B of the Act states notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of - 6. Assessee being a Private Limited Company is required to maintain its accounts on mercantile system and for the income tax purpose has to compute the income as per the provisions of the Income Tax Act. Section 145(1) provides the method of accounting but section 145A provides for the method of accounting in certain cases and the said provision is for the purpose of determining of income chargeable under the head profits and gains or business or profession. For better understanding, we would like to go through the provisions of section 145A of the Act, which reads as under: "145A. Method of accounting in certain cases.-For the purpose of determining the income chargeable under the head "Profits and gains of business or profession",-- (i) the valuation of invent....
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.... note that clause (ii) provides that the valuation of purchase and sale of goods or services and of inventory shall be adjusted to include the amount of any tax, duty, cess or fee (by whatever name called) actually paid or incurred by the assessee to bring the goods or services to the place of its location and condition as on the date of valuation. For the purpose of accounting this clause provides that in the P&L Account where there is element of opening stock, purchase, sales and closing stock the value of all these items should include the tax, duty, cess or fee levied thereon. In other words, the gross turnover includes the VAT/IGST/any other service tax liability etc. charged and similarly on the debit side i.e. the purchases, taxes paid should be added. So far as the closing stock is concerned, the same also includes the element of tax paid for bringing such goods to the place or location. 8. Now provisions of section 145A are very clear and unambiguous and leave no room for any doubt or even a second thought. Before us, ld. Counsel for the assessee has referred to plethora of decisions and judgments but we do not find it necessary to deal with the same as it may be merely....