DCIT, CHENNAI vs. M/S. INDIUM SOFTWARE (INDIA) LTD., CHENNAI

आदेश / O R D E R

The Revenue has raised several grounds in its appeal, however the crux of the issue is that the Ld.CIT(A) has erred in directing the Ld.AO to allow deduction U/s.10A of the Act, to the assessee without setting off the loss of its non-eligible units.

The Revenue has raised several grounds in its appeal, however the crux of the issue is that the Ld.CIT(A) has erred in disallowing the payment made towards service tax beyond the due date U/s.139(1) of the Act.

Initially the returns was processed U/s.143(1) of the Act and subsequently the case was selected for scrutiny under CASS and final assessment order was passed U/s.143(3) r.w.s 147 of the Act on 30.01.2015 for both the assessment years.

During the course of assessment proceedings, it was noticed by the Ld.AO that the assessee had not set-off the losses from its ineligible unit from the profits of the eligible unit while claiming deduction U/s.10A of the Act. The Ld.AO opined that the claim of the assessee was in violation of the Circular No.7/DV/2013 (File no.279/Misc./M-116/2012-ITJ) dated 16.07.2013. Therefore the Ld.AO computed the deduction U/s.10A of the Act, by setting off the losses incurred by the assessee’s ineligible unit with the profits of the eligible unit of the assessee. On appeal, the Ld.CIT(A) following the decision of the Hon’ble High Court in the case CIT v/s Yokogawa India Limited & Others reported in 246 CTR 226 and the decision of the Special Bench of the Tribunal in the case Scientific Atlanda India Technology Pvt. Ltd. v. JCIT reported in 2 ITR (Trib) 66, held the issue in favour of the assessee by directing the Ld.AO to allow deduction U/s.10A of the Act as claimed by the assessee ie., without setting off the losses of its non-eligible units from the profits of the eligible units of the assessee.

5.1 At the outset, the Ld.AR submitted that the issue is covered by the decision of the Hon’ble Karnataka High Court cited by the Ld.CIT(A) and the Special bench of the Chennai Tribunal cited supra. It was therefore pleaded that the order of the Ld.CIT(A) does not call for any interference. The Ld.DR could not controvert to the submission of the Ld.AR, however he relied on the order of the Ld.AO. After hearing both sides, I do not find it necessary to interfere with the order of the Ld.CIT(A) on this issue because he has only followed the decision of the Special Bench of the Chennai Tribunal and Hon’ble Karnataka High Court cited supra.

The Ld.AO had disallowed the expenditure of Rs.4,34,752/- being the payment made towards service tax after the due date of filing of the return U/s.139(1) of the Act by invoking the provision of Section 43B of the Act. On appeal, the Ld.CIT(A) following the decision of the Chennai Bench of the Tribunal in the case ACIT v. Real Image Technologies Pvt. Ltd. reported in 114 ITD 537 held that the service tax payable is not a liability to be treated at par with sales tax or excise duty and therefore provisions of Section 43B of the Act cannot be invoked. Accordingly he directed the Ld.AO to delete the addition.

6.1 Before us, the Ld.AR submitted that the assessee had not claimed the payment of service tax as deduction and hence the addition made by the Ld.AO is not warranted. The Ld.AR did not have any objection for remitting back the matter to the file of Ld.AO for verification. The Ld.DR on the other hand relied on the orders of the Ld.AO and pleaded for sustaining the same.

6.2 I have heard both the parties and carefully perused the materials on record. Service Tax is a tax on the service provided, which has to be collected from the receiver of the service by the service provider and remitted to the Government treasury. Thus if the service provider has collected the tax and has not remitted to the Government treasury, it becomes the income of the service provider and also violation of the provisions of the Service Tax Act.

Since, the Ld.AR has also expressed his desire for the matter to be remitted back; I hereby remit the matter back to the file of Ld.AO for fresh consideration and decide the matter in the light of the

Order pronounced on the 22nd August, 2017 at Chennai.