2019 (10) TMI 1403 - AT - Income Tax

Claim of service tax recoverable/written off - claim of deduction on account of the service tax paid in the earlier years, but debited during the year - assessee pointed out that the service tax recoverable is the amount of service tax on which credit is not allowed under the Service tax Act, hence, it is to be claimed in the P/L account in the audited financial statement of the assessee company. - Claim of the assessee was not allowed by the authorities below on the ground that it was pre-mature for the assessee to avail the benefit of Cenvat credit - HELD THAT - As under the Act, the said benefit on inputs and inputs services could be availed later also. The counter claim of the assessee is that since it realized that the said input could not be set off hence, the claim made in the books of accounts, merits to be allowed in the hands of the assessee. We are of the view that the assessee is at liberty to make the aforesaid claim in the year of its choice and the claim made in the year under consideration, merits to be allowed in the hands of the assessee. We find that the said issue has been decided by the various benches of Tribunal including the decision of Hyderabad Bench of the Tribunal in the case of M/s. NCS Distilleries P.Ltd 2014 (9) TMI 1160 - ITAT HYDERABAD . We hold that the write off of Cenvat credit is an allowable expenditure u/s 37(1) of the Act, in the year it was debited to the books of accounts. Hence, the grounds raised by the assessee in this appeal are allowed.

Summary

Issues: Claim of service tax write off as a deduction under the Income-tax Act.

Analysis:
The appeal was filed against the order of CIT(A)-37, New Delhi, related to the assessment year 2012-13 concerning the claim of service tax write off amounting to ?22,73,576. The Assessing Officer disallowed the claimed amount, adding it to the assessee's income, stating that the transaction did not entitle the deduction under the Income-tax Act. The CIT(A) noted that the time limit for availing Cenvat Credit had been extended, implying that the receiver of service could avail input tax credit without any specific time limit. The assessee contended that the service tax paid was to be set off against the service tax receivable, following which, if service tax was not recoverable, it was debited in later years. The assessee relied on judicial decisions to support its claim. The Revenue argued that service tax recoverable for services rendered could be set off in subsequent years. The Tribunal held that the claim of deduction on account of service tax paid but debited during the year was allowable under section 37(1) of the Act. The Tribunal emphasized that the assessee was entitled to make the claim in the year of its choice, and in this case, the claim made in the relevant year was deemed valid. The Tribunal referred to previous decisions, including the Hyderabad Bench's ruling, to support its decision. Consequently, the grounds raised by the assessee were allowed, and the appeal was granted in favor of the assessee.

In conclusion, the Tribunal allowed the appeal, emphasizing that the write off of Cenvat credit was an allowable expenditure under section 37(1) of the Income-tax Act when debited in the books of accounts. The decision was based on the principle that the assessee had the liberty to claim the deduction in the year of its choice, and in this instance, the claim made in the relevant year was deemed legitimate. The Tribunal's ruling was supported by previous judicial decisions, including the Hyderabad Bench's decision, establishing the validity of the claim for service tax write off as a deduction.