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Facts
The appellant, engaged in software engineering, filed an ITR for AY 2020-21, which was later revised to a loss. The AO completed assessment under Section 143(3) read with Section 144B, making an addition of Rs. 33,76,110/- for service tax paid, deeming it not pertaining to the year. The CIT(A) upheld this addition.
Held
The Tribunal noted the deductibility of service tax is governed by Section 43B and found it unclear if the expenditure was claimed previously or disallowed under Section 43B for non-payment. The matter was set aside to the AO for re-verification to determine these facts and decide after granting the appellant a reasonable opportunity of hearing.
Key Issues
Whether the service tax paid by the assessee was deductible under Section 43B of the Income Tax Act for AY 2020-21, considering potential prior claims or disallowances.
Sections Cited
143(3), 144B, 43B
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, COCHIN BENCH
Before: SHRI INTURI RAMA RAO, AM
O R D E R This appeal filed by the assessee is directed against the order of the National Faceless Appeal Centre (NFAC), Delhi [CIT(A)] dated 30.09.2024 for Assessment Year (AY) 2020-21.
Brief facts of the case are that the appellant is a company incorporated under the provisions of Companies Act, 1956. It is engaged in the business of computer software engineering. The return of income for AY 2020-21 was filed on 31.03.2021 disclosing total income of Rs. 13,20,600/-. The same was revised on 28.05.2021 declaring a loss of Rs. 20,66,887/-. Against the said return of income, the assessment was Software Associates Informaton Technology P. Ltd. completed by the ACIT, Circle 1(1), Kozhikode (hereinafter called "the AO") vide order dated 16.09.2022 assed u/s. 143(3) r.w.s. 144B of the Income Tax Act, 1961 (the Act) at a total income of Rs. 13,09,223/-. While doing so, the AO made addition on account of service tax paid of Rs. 33,76,110/- made in the original return of income. The AO was of the opinion that the service tax paid does not pertain to the year under consideration.
Being aggrieved, an appeal was filed before the CIT(A), who vide the impugned order confirmed the action of the AO for the failure of the appellant to prove that service tax was claimed as deduction was debited to Profit & Loss A/c.
Being aggrieved, the appellant is in appeal before us in the present appeal.
When the appeal was called nobody appeared on behalf of the assessee despite due service of notice of hearing. Therefore, we proceeded to dispose of the appeal after hearing the learned Sr. DR.
The issue in the present appeal relates to the deductibility of service charge paid under the Vivad Se Vishwas Scheme, 2024. No doubt, the claim for deduction of service tax is governed by the provisions of section 43B of the Act. From the material on record it is not clear whether these expenditures were claimed as deduction in the earlier year on accrual basis and addition was made invoking provisions of section 43B for nonpayment. In any event, expenditure on service tax is allowable on payment basis and the same is Software Associates Informaton Technology P. Ltd. covered by provisions of section 43B of the Act. Therefore, the matter is set aside to the file of the AO for verification whether it had claimed any deduction in the earlier years and disallowed the deduction for non-payment of service tax. The matter is remand back to the file of the AO to decide the appeal in accordance with law after affording reasonable opportunity of hearing to the appellant.
In the result, the appeal filed by the assessee stands allowed for statistical purposes.
Order pronounced in the open court on 10th February, 2025. 8.