BIHAR MEDICAL SERVICES & INFRASTRUCTURE CORPORATION LIMITED,PATNA vs. AC/DC CIRCLE 1, PATNA

The assessee is in appeal before the Tribunal raising the following grounds of appeal:

For that the other grounds, if any, shall be urged at the time of hearing of the appeal."

Brief facts of the case are that the assessee had filed the return of income for AY 2023-24 on 29.09.2023 declaring the total income at ₹2,72,02,570/-. The case was selected for scrutiny and during the assessment proceedings, the Assessing Officer [Ld. 'AO'] observed large other expenses claimed and investigated the GST payment expense of ₹84,90,34,589/- and GST filing fee of ₹2,19,998/-, aggregating to ₹84,92,54,587/-. The Ld. AO noted that the assessee had failed to furnish sufficient documentary evidence to substantiate the claim, establish whether the centage receipts were inclusive or exclusive of GST, and prove that the GST payment was directly related to the income shown. Consequently, the Ld. AO disallowed the total GST expenses of ₹84,92,54,587/- and determined the total income at ₹87,64,57,157/- u/s 143(3) r.w.s. 144B of the Act. Aggrieved with the assessment order, the assessee filed an appeal before the Ld. CIT(A). The appellate authority observed that the assessee did not furnish reliable reconciliation to demonstrate that the income credited in the Profit & Loss Account was exclusive of GST and held that mere payment of a statutory liability does not automatically render it allowable as an expenditure. Accordingly, the Ld. CIT(A) confirmed the order of the Ld. AO and dismissed the appeal of the assessee.

Aggrieved with the order of the Ld. CIT(A), the assessee has filed the appeal before the Tribunal.

Rival contentions were heard and the submissions made have been examined.

The Ld. AR submitted before us that the assessee is a wholly owned corporation established by the Government of Bihar as a procurement agency for procurement and distribution of medical equipment, drugs, service, construction and infrastructure for Department of Health, Government of Bihar and is receiving centage charges from Government of Bihar in lieu of services rendered. It was submitted the assessee had disputed the levy of GST on the ground that it is rendering services to Govt. of Bihar and therefore, there is no liability of GST in terms of Clause no. (8) of Notification No.12/2017 dated 28/06/2017. However, the Bihar Authority for Advance Ruling Goods and Service Tax, Commercial Taxes Department, Govt. of Bihar vide its order dated 24/03/2022 has held that since the Corporation is not falling within the definition of "Government' or 'Local Authority', the services rendered will not be exempt under Clause (8) of Notification No. 12/2017 dated 28/06/2017 and accordingly, Corporation is liable for payment of GST from 01/07/2017 onwards on the centage received against providing service to the Govt. of Bihar. It was submitted that the order of Authority for Advance Ruling has been accepted. The Corporation has accordingly claimed expenditure of Rs.84.92 crores which inter alia include GST of Rs.84.90 crores and GST filing fee of Rs.2.19 lakhs in FY 2022-23 corresponding to AY 2023-24 on actual payment basis which has been disallowed by the A.O. and confirmed by the CIT(A). The Ld. AR submitted that the issue is covered by the decision of the Hon'ble Apex Court in favour of the assessee and requested for remanding the issue before the Ld. AO or the Ld. CIT(A) so that proper submission could be made as the liability had crystalized on account of acceptance of the ruling of the Bihar Authority for Advance Ruling Goods and Service Tax, Commercial Taxes Department Bihar Medical Services & Infrastructure Corporation Limited. and, therefore, is allowable as a deductible expenditure and the assessee has the required evidence for the claim of deduction, which could not be filed earlier. The Ld. DR relied upon the order of the Ld. CIT(A) and requested that the same may be upheld.

We have considered the submissions made, gone through the facts of the case and perused the record and the order of the Ld. CIT(A). The disallowance was made on account of failure of the assessee to furnish the required documentary evidence before the Ld. AO/the Ld. CIT(A). The Bench was of the view that in the interest of justice and fair play, one more opportunity may be provided to the assessee to present its case. Hence, after examining the facts of the case, we deem it appropriate to set aside the order of the Ld. CIT(A) as well as the order of the Ld. AO and remand the matter before the Ld. AO for making the assessment de novo. Needless to say, the assessee shall be given a reasonable opportunity of being heard to make any further submission it wants to make in support of the relief claimed and shall not seek unnecessary adjournments. Accordingly, the grounds taken by the assessee in the appeal are partly allowed for statistical purposes.

In the result, the appeal filed by the assessee partly allowed for statistical purposes. Order pronounced in the open Court on 7th October, 2026. [Yogesh Kumar US] [Rakesh Mishra] Judicial Member Accountant Member Dated: 07.10.2026 Bidhan (Sr. P.S.)