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2023 (10) TMI 129 - AT - Income TaxAllowability of expenditure on service tax liability - AO held that payment of service tax is covered under section 43B of the Income Tax Act and same is allowable in the year of payment only - HELD THAT - The impugned service Tax liability was actually paid by the Assessee in FY 2014-15. As per Section 43B and as per the law enunciated by Hon ble SC Maruti Suzuki India Ltd 2020 (2) TMI 376 - SUPREME COURT the amount of deduction is available only when it is actually paid during the year irrespective of the accrual of actual liability as per the relevant statute. The assessee had claimed that the Liability was not crystallized in FY 2014-15 and assessee paid the amount under protest. Assessee claimed that the impugned service Tax Liability was crystallized only in F.Y.2015-16 after the Order of Pr. Commissioner Service Tax Pune dated 30/10/2015. Service Tax Liability arises when the services are performed. The impugned services were actually performed in financial years prior to F.Y.2015-16. There is no dispute about these facts. Superintendent of Central Excise Service Tax had passed the order in F.Y.2014-15 directing the assessee to pay the Service Tax for the Services provided from July, 2012 to March, 2014. Therefore, the liability to pay the service Tax had arisen in earlier financial years and the contention of the assessee is rejected that the demand was not crystallized. Thus, in the case of United Glass Manufacturing CO 2012 (9) TMI 914 - SUPREME COURT allowed deduction u/s 43B, of Sales tax paid on estimate basis. Therefore, no merit in the argument of the assessee that the Liability of Service Tax was not crystallized during F.Y.2014-15 and it was crystallized only in F.Y.2015-16, though the Service Tax amounts were paid in F.Y.2014-15. In this case since the amount was not paid during the F.Y. 2015-16, but it was actually paid in F.Y.2014-15 and earlier years the AO has rightly disallowed the impugned amount as un-allowable expenditure u/s. 43B of the Act for A.Y.2016-17.Therefore, in these facts and circumstances of the case we agree with the AO and upheld the disallowance. Decided against assessee.
Issues Involved:
1. Disallowance of service tax liability payment. 2. Interpretation of Section 43B of the Income Tax Act. 3. Crystallization of service tax liability. 4. Inclusion of penalty in service tax expenditure claim. 5. Deduction in the year of payment. Summary: Issue 1: Disallowance of Service Tax Liability Payment The learned CIT(A) and AO confirmed the disallowance of Rs. 2,63,49,863/- claimed by the assessee as service tax liability for A.Y.2016-17, on the grounds that the payment was not made in the year under consideration but in earlier years. Issue 2: Interpretation of Section 43B of the Income Tax Act The Tribunal examined Section 43B, which mandates that deductions for tax, duty, cess, or fee are allowable only in the year of actual payment, irrespective of the year of accrual. The Supreme Court's decision in Maruti Suzuki India Ltd vs CIT was cited, which emphasized the necessity of actual payment for deductions under Section 43B. Issue 3: Crystallization of Service Tax Liability The assessee argued that the service tax liability was crystallized in F.Y.2015-16 after receiving the order from the Principal Commissioner of Service Tax. However, the Tribunal held that the liability arose when the services were provided in earlier financial years, and the payment made in F.Y.2014-15 could not be claimed in F.Y.2015-16. Issue 4: Inclusion of Penalty in Service Tax Expenditure Claim The CIT(A) erred in holding that the claim included a penalty component. The Tribunal found that the claim was solely for service tax and did not include any penalty. Issue 5: Deduction in the Year of Payment The assessee's alternative plea to allow the deduction in the year of actual payment was rejected. The Tribunal upheld that the CIT(A) has no jurisdiction to direct the AO for any other assessment year not under appeal. Conclusion: The Tribunal dismissed the appeal, upholding the disallowance of Rs. 2,63,49,863/- as the service tax was paid in earlier years and not in the year under consideration. The Tribunal also dismissed the plea for allowing deductions in earlier years, affirming the AO's and CIT(A)'s orders.
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