MEETA KHANNA DAVE,MUMBAI vs. ACIT, CIRCLE 16(1), MUMBAI

Meeta Khanna Dave 1.The addition of an amount of Rs.48,31,822/- u/s 43B of the Income Tax Act. The Ld. CIT(A) has failed to appreciate that the said amount represents equivalent amount of CENVAT credit being Service Tax on the input service availed by the appellant.” 2. The brief, facts of the case are that the assessee is a proprietor of IBIS Production, engaged in the business of production of Advertising/commercial films, filed her return of income for AY 2013-14 on 23/09/2013, declaring total income at Rs.1,41,14,170/-. The case was selected for scrutiny and notice u/s 143(2) and 142(1) of the Income Tax Act, 1961 (hereinafter ‘the Act’) along with questionnaire were issued. In response to notices, the Authorized Representative of the assessee appeared from time to time and filed various details, as called for. During the course of assessment proceedings, the AO called upon the assessee to furnish the details of service tax collected and service tax paid. In response, the assessee has filed details of service tax collection along with service tax returns filed with Central Excise Department, as per which, the assessee has collected service tax amount of Rs.1,30,12,947/- on service charges received for the year as against which claimed credit for CENVAT paid on input service amounting to Rs.48 lakhs and the net amount of Rs.81.82 lakhs has been paid to the Department. The AO after considering relevant submissions held that although the assessee claimed to have availed CENVAT credit amounting to Rs.48 lakhs but failed to file any evidence regarding input services, therefore, disallowed service tax amounting to Rs.48,31,822/- u/s 43B of the Act. Similarly, the AO has made disallowances towards expenses incurred in relation to exempt income u/s 14A, disallowance of rent expenses and disallowance at out of business expenses.

The Ld. AR for the assessee submitted that the Ld. CIT(A) was erred in sustaining disallowance of service tax u/s 43B of the Act, without appreciating the fact that there is no discrepancies in service tax collection on service charges received by the assessee, CENVAT credit claimed on input services and net service tax payment to Central Excise Department. The AO has wrongly appreciated the fact without understanding the method of accounting followed by the assessee to account input service where the assessee has claimed credit for CENVAT available on input services. The assessee has filed complete details including service tax returns filed with the Department as per which there is no discrepancy in service tax collection as well as payments. In so far as, the CENVAT credit, the assessee has availed input services on which service tax has been paid to service provider and the service providers had paid service tax to department for which Meeta Khanna Dave the credit is available to the assessee against service tax payable to the Department.

The Ld. DR on the other hand, strongly supported the order of the Ld. CIT(A).

We have heard both the parties and perused the materials available on record.

In the result, appeal filed by the assessee is allowed.