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Income Tax Appellate Tribunal, “A” BENCH, CHENNAI
Before: HON’BLE SHRI MAHAVIR SINGH & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member)
Aforesaid appeal by assessee for Assessment Year (AY) 2012-13 arises out of the order of learned Commissioner of Income Tax (Appeals)-2, Chennai [CIT(A)] dated 29.07.2016 in the matter of assessment framed by Ld. Assessing Officer [AO] u/s. 143(3) of the Act on 10.11.2014.
2 - 2. The only issue in the appeal is disallowance of Service Tax payable by the assessee u/s. 43B of the Act for Rs. 89.18 Lacs. During hearing, none has appeared for assessee. Left with no option, we proceed to dispose-off the appeal after hearing Ld. Sr. DR since the appeal has been listed as old appeal. The Ld. Sr. DR pleaded for dismissal of the appeal since the assessee did not pay the service tax by due date of filing of return of income.
The material on record would show that a sum of Rs.94,17,953/- representing Service Tax was shown to be payable by the assessee at year-end. The assessee had only paid an amount of Rs.4,99,795/- before due date of filing of return of income. Therefore, the balance amount of Rs.89,18,158/- was disallowed u/s 43B.
During appellant proceedings, the assessee, inter-alia, submitted that the Service Tax amount was not routed through Profit & Loss Account and therefore, no such disallowance u/s. 43B could be made. The assessee relied on the decision of Hon’ble Delhi High Court in Noble & Hewitt (I) (P) Ltd (2008; 166 taxman 48) to support the argument. However, the disallowance was confirmed against which the assessee is in further appeal before us.
Upon careful consideration of factual matrix, we find that the assessee is following exclusive method to account Service Tax liability in the Books of Accounts and therefore, the argument that the Service Tax was not routed through profit & Loss Account would not hold good. At the same time, we find that as per extant Service Tax Rules, the Service Tax liabilities arise in the hands of the assessee on receipt basis. Until the consideration is received, Service Tax is not payable. Therefore, the liability to pay Service Tax, at year-end, may not have actually arisen in the hands of the assessee. Therefore, the disallowance has to be made only to the extent the liability to pay Service Tax Liability had arisen in the hands of the assessee at year-end. The Ld. AO is directed to verify this fact and restrict the disallowance to that extent only. 6. The appeal stand allowed for statistical purposes.