2015 (12) TMI 348 - AT - Income Tax

Disallowance on account of non-payment of service tax liability u/s 43B - CIT(A) deleted the addition - Held that - CIT(A) has given a categorical finding of fact that the assessee had not claimed the amount of Service Tax Liability in the profit and loss account and hence there was no question of making disallowance and Secondly, the assessee had collected the Service Tax and paid later, on the dates as incorporated above. Thus, no disallowance u/s 43B can be sustained under these facts and circumstances. Accordingly, the finding of CIT(A) is upheld. Regarding disallowance of Employee s contribution to PF also, we uphold the order of the CIT(A) as it is not disputed before us that the PF dues though have been paid beyond the due date of Provident Fund Act, but much before the due date of filing of return of income u/s 139(1) which is allowable in view of the decision of Hon ble Supreme Court in the case of CIT vs Alom Extrusions Limited, reported in 2009 (11) TMI 27 - SUPREME COURT . Thus, the order of the CIT(A) on this score also is upheld. - Decided in favour of assessee

Summary

Issues:
1. Disallowance of late payment of Service Tax liability under section 43B of the Income Tax Act.
2. Disallowance of late payment of Employees' Contribution to PF under section 43B of the Income Tax Act.

Analysis:

Issue 1: Disallowance of late payment of Service Tax liability under section 43B:
The Assessing Officer disallowed the late payment of Service Tax liability and Employees' Contribution to PF under section 43B of the Income Tax Act due to delayed payments mentioned in the Balance Sheet. However, the CIT(A) found that the assessee did not deduct the Service Tax liability amount from the profit and loss account, making it ineligible for disallowance under section 43B. The CIT(A) cited relevant case laws to support this finding, emphasizing that the deduction was not claimed in the P&L account, hence disallowance was unwarranted. The CIT(A) also noted that the assessee paid the Service Tax after collecting it from payers, further justifying the non-applicability of section 43B. The detailed payment schedule provided by the appellant demonstrated compliance with Service Tax rules, reinforcing the CIT(A)'s decision to allow the appeal on this ground.

Issue 2: Disallowance of late payment of Employees' Contribution to PF under section 43B:
Regarding the disallowance of late payment of Employees' Contribution to PF under section 43B, the CIT(A) observed that the payment was made well before the due date of filing the return of income. Citing the decision of the Hon'ble Supreme Court in a relevant case, the CIT(A) allowed the deduction for the Employees' Contribution to PF. The Appellate Tribunal upheld the CIT(A)'s decision on this issue, noting that while the payment was delayed under the Provident Fund Act, it was made before the due date of filing the income tax return under section 139(1). Consequently, the disallowance was deemed unjustified, and the CIT(A)'s order was upheld.

In conclusion, the Appellate Tribunal dismissed the revenue's appeal and allowed the cross objections raised by the assessee, affirming the decisions of the CIT(A) on both issues. The judgment highlighted the importance of proper accounting treatment and timely payments in determining the applicability of section 43B disallowances.