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Income Tax Appellate Tribunal, DELHI BENCH, ‘B’: NEW DELHI
Before: SHRI SHAMIM YAHYA & SHRI YOGESH KUMAR US
ORDER PER SHAMIM YAHYA, AM, This appeal by the Revenue is directed against the order of the Ld. CIT(A)-31, New Delhi, dated 12.06.2019 pertaining to Assessment Year 2015-16.
The ground raised reads as under:-
“Whether on facts and circumstances of the case, the Ld. CIT(A) is right in not disallowing the service tax liability of Rs.4,72,10,275/- which was receipt from the debtors before the due date of filing of return but not paid to the Government account as per the provisions of section 43B of the Income Tax Act, 1961 (in short ‘the Act’).”
Brief facts of the case are that the Assessing Officer observed that from the perusal of the tax audit report it is seen that the assessee had not paid tax of Rs.7,96,80,264/- on or before due date of filing of income tax return. Upon Assessing Officer’s enquiry, the assessee submitted copies of challan of service tax showing payment of Rs.40,00,000/- made before the filing of Income Tax Return under section 139(1) of the Act i.e. 30.11.2015 in the case of the assessee company who is required to furnish a report referred to in section 92E of the Act. From the same, the Assessing Officer observed that this shows that the assessee company has not paid Service tax of Rs.7,96,80,264/- (8,36,80,264 - 40,00,000) on or before due date of filing of Income Tax Return i..e. 30.11.2015. The Assessing Officer referred to the provision of section 43B of the Act. The Assessing Officer referred to the assessee’s reliance upon the decision of the Hon’ble Delhi High Court in the case of CIT vs Noble and Hewitt (I)
Pvt. Ltd. in appeal No. 839 of 2007 dated 10.09.2007. and also he noted that the assessee has given several decisions of ITAT Delhi Benches and ITAT Mumbai Benches and he found that facts in all those cases are different. The Assessing Officer also relied upon the decision of the Hon’ble Kolkata High Court in the case of Chowringhee Sales Bureau Pvt. Ltd. vs CIT [1977] 110 ITR 385(Kol.) Accordingly, he disallowed a sum of Rs.7,96,80,264/-.
4. Against the above order, the assessee appealed before the Ld. CIT(A).
5. Upon assessee’s appeal, the ld. CIT(A) referred to the various submissions of the assessee and found that Hon’ble Bombay High Court in the case of Ovira Logistics (P) Ltd. has considered the issue decided by Hon’ble Delhi High Court in the case of CIT vs Noble And Hewitt (I) P. Ltd. He referred to the finding of the Hon’ble Bombay High Court therein, thereafter he referred to some other case laws and concluded as under:-
“In view of the above factual and legal position, thus I hold that the Service Tax collected, whether debited in the Profit & Loss Account or not, has to be treated as trading receipt and hence to be included in the total income unless it is actually paid to the Government account before the due date of filing of return. The Ld. AR has furnished the details regarding service tax collected but not paid to the extent of Rs.3,24,69,989/- before the due date of filing of return vide submission dated 06.06.2019 and hence the addition made by the Assessing Officer u/s 43B to the extent of Rs.3,24,69,989/- is certainly justified. However, with the abundant precaution, the Assessing Officer is directed to verify the factual position and quantify the service tax actually collected but not paid before the due date of filing of return u/s 139(1) and then restrict the disallowance accordingly.”
Against the above order, the Revenue is in appeal before us.
7. We have heard both the parties and perused the records. We find that grievance raised by the Revenue is whether the Ld. CIT(A) is right in not disallowing the service tax liability of Rs.4,72,10,275/- which was received from the debtors before the due date of filing of return but not paid to the Government account as per the provisions of section 43B of the Act. We find the ground raised by the Revenue is not clearly emanating from the orders of authorities below. Be as it may, it is also not clear from the orders of the authorities below as to whether they have correctly followed the decision of the jurisdictional High Court in the case of CIT vs Noble And Hewitt (I) P. Ltd. in appeal No. 839 of 2007 dated 10.09.2007 . The Assessing Officer is claiming that the facts are different while the Ld. CIT(A) in his finding is stating the same decision is considered by Hon’ble Bombay High Court in the case of Ovira Logistics (P) Ltd. and he has referred to the decision of the Hon’ble Bombay High Court. We find that in the case of CIT vs Noble And Hewitt (I) P. Ltd. (supra), Hon’ble Delhi High Court has held as under:-
“The revenue is aggrieved by an order dated 17-11-2006 passed by the Income Tax Appellate Tribunal ('Tribunal'), Delhi Bench "D", New Delhi in relevant for the assessment year 1999-2000.
2. The assessed maintains a mercantile system of accounting. It had collected service tax during the previous year relevant to the assessment year in question. Out of the service tax so collected the assessed had deposited part of the amount but an amount of Rs. 14.40 lakhs was not deposited by the assessed with the concerned authorities. The assessed did not claim any deduction in this regard nor did it debit the amount as an expenditure in the Profit & Loss Account. The assessing officer as well as the Commissioner (Appeals) ('Commissioner (Appeals)') nevertheless disallowed the amount and added it back to the income of the assessed.
3. The Commissioner (Appeals) was of the view that the assessed had not followed the correct accounting procedure. If it had done so, the amount would have had to be debited to Profit & Loss Account and thereafter the assessed could claim a deduction thereon. The Commissioner relied upon decision of the Calcutta High Court in Chowringhee Sales Bureau (P) Ltd. v. CIT .
In appeal, the Tribunal was of the opinion that in view of the provisions of Section 43B of the Income Tax Act, 1961 ('Act'), since the assessed had not claimed a deduction there was no question of disallowing the deduction which was not even claimed. The relevant extract of Section 43B of the Act reads as follows:
Certain deductions to be only on actual payment. Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of (a) any sum payable by the assessed by way of tax, duty, cess or fee, by whatever name called, under any law for the time being in force,
(b) to (f) ** ** ** shall be allowed (irrespective of the previous year in which the liability to pay such sum was incurred by the assessed according to the method of accounting regularly employed by him) only in computing the income referred to in Section 28 of that previous year in which such sum is actually paid by him.
Learned Counsel for the revenue urges that the decision of the Calcutta High court in Chowringhee Sales Bureau (P.) Ltd. 's case (supra) covers the point in its favor. We are unable to agree. In that case it was held that the liability to pay sales tax arose the moment a sale or purchase was effected and if an assessed was maintaining accounts on the mercantile system it would be entitled to deduction of the estimated liability of sales tax, even though such sales tax had not been paid to the sales tax authorities. The question there concerned was the entitlement of the assessed to deduction under Sections 10(1)and 10(2)(xv) of the Indian Income Tax Act, 1922.The decision is clearly distinguishable in its application to the present case. Here we are concerned with an assessed who has not even claimed any deduction on the ground of service tax and has not debited the amount to its Profit & Loss Account. Moreover the provisions of Section 43B of the Act are quite clear in this regard. The decision of the Calcutta High Court in Chowringhee Sales Bureau (P) Ltd. s case (supra) was not in the context of the applicability of Section 43B of the Act.
6. In our opinion since the assessed did not debit the amount to the Profit& Loss Account as an expenditure nor did the assessed claim any deduction in respect of the amount and considering that the assessed is following the mercantile system of accounting, the question of disallowing the deduction not claimed would not arise.
7. Learned Counsel for the revenue submits that the assessed has sought to evade tax under the mercantile system of accounting. We are of the view that it is not for the revenue authorities to tell the assessed how to maintain its accounts.
8. We cannot find any fault in the view taken by the Tribunal and find no merit in this appeal
No substantial question of law arises.
10.The appeal is dismissed.”
We find, it is a settled law that the issue on which there is a decision of the jurisdictional High Court, the same has to be followed. In the interest of justice, we direct the Assessing Officer to examine the issue in this appeal and on the touchstone of the aforesaid jurisdictional High Court decision accordingly. Needless to add, assessee should be granted adequate opportunity of being heard.
In the result, the appeal of the Revenue stands allowed for statistical purposes.
Order pronounced in the open court on 11/07/2022.