2022 (2) TMI 1467 - HC - Income Tax

Deduction towards Service Tax - payment of tax is allowed only on actual payment as per Section 43B of the Act OR on the basis of accrual of liability - HELD THAT - Deduction by the assessee for the amount expanded towards service tax. This deduction could be granted only upon actual payment and not on accrual as is provided under Section 43B of the Income Tax Act, 1961. The department does not dispute either the genuineness of expenditure or that the amounts were actually deposited before the government revenue. The only question was of the year in which the assessee could claim such deduction. With respect to both the years, Tribunal noted that the CIT (Appeals) was dealing with the assessee s appeals for both assessment years and therefore ought to have allowed the claim of the assessee in terms of Section 43B of the Act or at best in the earlier year 2012-13. The Tribunal therefore issued consequential directions. No error in the view of the Tribunal. As noted, undisputedly the assessee had undertaken the expenditure and that the amount was actually paid in the government revenue. In terms of Section 43B of the Act the expenditure would be available only upon actual payment.

Summary

The High Court admitted an appeal regarding the enhancement of income made by CIT(A) and set aside the enhancement, stating it was within the powers of CIT(A) u/s 251 of the Act. The Tribunal justified deleting an addition made by the Assessing Officer and directing the allowance of deductions towards Service Tax based on actual payment as per Section 43B of the Act. The Tribunal's decision was upheld by the High Court.