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Income Tax Appellate Tribunal, MUMBAI BENCH “I”, MUMBAI
Before: SHRI R.C.SHARMA & SHRI PAWAN SINGH
O R D E R
PER PAWAN SINGH, JM:
This appeal is filed by the Revenue against the order of CIT(A)-21, Mumbai dated 17.04.2013 in respect of Assessment Year (AY) 2007-08 on the following grounds of appeal:
1"On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting disallowance u/s 43B amounting to `. 1,42,00,434/- without considering the fact that the service tax was shown as payable for the Financial Year 2006-07 relevant to the Assessment Year 2007-08 which was required to be allowed in the year in which such tax was actually paid as per specific provisions of section 43B of the Act”.
1. The appellant craves leave to add, amend, vary, omit or substitute any of the aforesaid grounds of appeal
at any time before or at the time of hearing of appeal.
2. The appellant prays that the order of CIT(A) on the above ground be set aside and that of the assessing officer be restored.
2. The assessee, who is engaged in the business of surface transport and trading in construction materials, filed his return of income on 28.10.2007 declaring total income at `. 73,82,91,700/-. The case of assessee was selected for scrutiny and after service of notice assessment order u/s 143(3) was passed on 21.12.2009 assessing the total income of the assessee. After passing the order of assessment, the assessee was served notice u/s 154 of the Act dated 06.01.2011 for rectification of mistake allegedly apparent on the face on record of the order dated 21.12.200.
The AO while rectifying the order made an addition of `. 1,42,00,434/- on account of unpaid service tax before filing the return and excess grant of interest u/s 244A of `.
18,52,381/- vide order dated 20.03.2012.
Against the order of rectification u/s 154, the assessee filed an appeal before the CIT(A). The CIT(A) after giving an opportunity to revenue and the assessee, Ld. CIT(A) deleted the addition of `. 1,52,00,434/-. While deleting the addition u/s 43B, the CIT(A) made the following observation:-
4.2 I have considered the submissions of the appellant and that the AO had added amount of Rs.1,42,00,434/- for non payment of service tax within the due date by invoking the provisions of sec. 43B of the Act. Service tax liability will be on the appellant, after the appellant receives the services from the client. This issue is clear from the service tax provision of Rule 6(1) of Service Tax in which it clearly states that service tax is to be paid to the Central Government by the 6th of the month if the duty is deposited electronically, through internet banking, or, in any other case, the 5th day of the, month, as the case may be immediately following the quarter in which the payments are received, towards the value of taxable services. Here appellant had not received the service tax from the client and as per the Service Tax Act, this has to be paid after the receipt of the service tax from the client within 5th and 6th of the month. Similar issue has come into consideration of the selected orders of the ITAT, Mumbai Bench “C” in the case of Pharma Search Vs ACIT 15(3), Mumbai (2012) 53 SOT 1 (Mum) and ITAT Chennai bench in the case of ACIT Vs Real Image Media Technologies P Ltd. (2008) 306 ITR (AT) 106 (Chennai) wherein it is held as under: Section 43B of the Income tax Act, 1961 – Business disallowance – Certain deductions to be allowed only on actual payment - Assessment year 2007-08 - Whether for making any disallowance under section 438, first of all it has to be established that such sum is payable - Held, yes - Whether rigor of section 43B might be applicable to case of sales tax or excise duty but same could not be said to be position in case of service tax because of two reasons, firstly, a service provider is never allowed deduction on account of service tax which is collected by it on behalf of Government and is paid to Government account accordingly and secondly, liability arises to make payment only after service provider has received payments and if there is no liability to make payment to credit of Central Government because of non-receipt of payments from receiver of services, it cannot be said that such service tax has become payable in terms of clause (a) of section 43B because that clause specifically mentions ‘sum payable by assessee’- Held, yes – Whether, therefore, if liability to pay service tax does not exist, service tax cannot be said to be ‘payable’ and, therefore provisions of section 43B could not also be invoked – Held, yes [in favour of assessee] Business expenditure – Deduction only on actual payment – service tax- assessee, A service provider – liable to make payment only on receiving payment and not entitled to claim deduction on account of service tax – Section 43B not applicable – Deletion of addition – proper – Income tax Act, 1961, s. 43B – Central Sales Tax Act, 1956, s. 6 – Finance Act, 1994, ss. 67, 68 – Service Tax Rules, 1994, R.6. 4.3 It is clear from the above decisions that service tax has to be paid by the appellant after the receipt from the client. In the case herein above, appellant had not received service tax. Hence AO cannot invoke the provisions of sec. 43B. Therefore, AO’s addition of `. 1,42,00,434/- is deleted and relief granted to the appellant of `. 1,42,00,434/- Ground nos. 13 and 3 are allowed. However, while considering the conclusion of interest u/s 243C, the CIT(A) made the following direction in its order dated 17.04.2013:-
(a) the company which is liable to pay advance tax under section 208 has failed to pay such tax or – (i) the advance tax paid by the company on its current income on or before the 15th day of June is less than fifteen per cent of the tax due on the returned income or the amount of such advance tax paid on or before the 15th day of September is less than forty-five percent of the tax due on the returned income or the amount of such advance tax paid on or before the 15th day of December is less than seventy-five percent of the tax due on the returned income, then, the company shall be liable to pay simple interest at the rate of one percent per month for a period of three months on the amount of the shortfall from fifteen percent or forty five percent or seventy five percent, as the case may be, of the tax due on the returned income;"
Against the order of CIT(A), the revenue has filed the present appeal before this Tribunal.
We have heard the ld. Departmental Representative (DR) of the Revenue and Authorised Representative (AR) of assessee and perused the material available on record and ld. DR relied upon the order u/s 154 of the Act passed by AO and argued that the CIT(A) has wrongly deleted the addition made by the AO. On the other hand, the AR of the assessee relied upon the judgment of co-ordinate bench of this Tribunal in titled as Pharma Search Vs. ACIT, Judgment of Chennai Tribunal titled as ACIT Vs. Real Image Media Technologies P. Ltd. in ITA No. 2171/06 dated 31.12.2007 and judgment of jurisdictional High Court in ITA No. 1023/13 titled as CIT Vs. Ovira Logistics Pvt. Ltd.
The Hon’ble jurisdictional High Court while hearing the case which is almost on identical issues held as under:-
As far as the remaining amount of `. 48,10,998/- was concerned, the Commissioner of Income Tax (Appeals) has held that the same could not disallowed under section 43B of the Act since it was not payable as on 31st March 2007. It was found that the amount on which service tax was payable had not been received from the parties to whom services were rendered. As a result, the provisions of section 43B were not attracted.
The assessee has not received the amount of `. 1,42,00,434/- , during the current financial year, and the same was shown as balance unclaimed in respect of current year and hence the service tax amount had not become due on 31.03.2007 and that the service tax is liable to be paid when the principle amount which service tax is levied is actually received.
We have seen the balance-sheet of P&L A/c wherein the amount of `.
1,42,00,434/- shown as balance unclaimed in respect of current year.
We notice that the case of assessee is squarely covered by the judgment of our jurisdictional High Court in case of ACIT Vs. Ovira Logistics Pvt. Ltd. (supra) and respectfully following the judicial discipline, we do not find any merit in the appeal filed by the Revenue and thus the appeal filed by the Revenue is dismissed.
As a result, appeal filed by the Revenue is dismissed.
Order pronounced in the open court on this day 30th of October, 2015.