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2025 (1) TMI 1348 - AT - Income TaxDisallowance u/s. 43B on account of GST payable - short contention of the assessee is that GST has not been routed through Profit and Loss account therefore no disallowance can be made - HELD THAT - The amount disallowed u/s. 43B has not been routed through P L account is not rebutted by the Revenue. No contrary material has been placed before us by the Revenue to show that the assessee has claimed deduction in respect of GST. The contention of the assessee that aforesaid amount has been reflected as GST payable under the head current liabilities is uncontroverted. As in the case of CIT vs. Noble and Hewitt (I) P. Ltd. 2007 (9) TMI 238 - DELHI HIGH COURT held that where the assessee has neither claimed deduction on account of Service Tax nor has debited the amount to Profit and Loss account the provisions of section 43B of the Act do not get attracted. Hence question of disallowance of deduction not claimed does not arise. Decided in favour of assessee.
ISSUES PRESENTED and CONSIDERED
The core issue presented and considered in this appeal was the disallowance under Section 43B of the Income Tax Act, 1961, amounting to Rs. 3,55,01,693/-, related to Goods and Services Tax (GST) payable. The Tribunal was tasked with determining whether the disallowance was appropriate given that the GST amount was not routed through the Profit and Loss account. ISSUE-WISE DETAILED ANALYSIS Disallowance under Section 43B of the Income Tax Act, 1961 Relevant legal framework and precedents: Section 43B of the Income Tax Act mandates that certain deductions are only allowable on an actual payment basis, rather than an accrual basis. This includes taxes, duties, cess, or fees under any law for the time being in force. The appellant relied on precedents such as CIT vs. Noble and Hewitt (I) P. Ltd., CIT vs. Calibre Personnel Services P. Ltd., and CIT vs. S & A Finman Ltd., which establish that if no deduction is claimed in the Profit and Loss account, Section 43B does not apply. Court's interpretation and reasoning: The Tribunal considered the appellant's argument that the GST amount was not charged to the Profit and Loss account and was instead credited to the Central Government Account. The Tribunal noted that the Revenue did not provide any evidence to counter the appellant's claim that the GST payable was not routed through the Profit and Loss account. The Tribunal referred to the Delhi High Court decision in CIT vs. Noble and Hewitt (I) P. Ltd., which supports the appellant's position that Section 43B does not apply when no deduction is claimed in the Profit and Loss account. Key evidence and findings: The appellant provided evidence that the GST amount was shown as payable under current liabilities and was not claimed as a deduction in the Profit and Loss account. The Tribunal found no contrary evidence from the Revenue to suggest otherwise. Application of law to facts: The Tribunal applied the legal principles from the cited precedents to the facts of the case, concluding that since the GST amount was not claimed as a deduction in the Profit and Loss account, disallowance under Section 43B was not warranted. Treatment of competing arguments: The appellant argued that the issue was debatable and not suitable for adjustment under Section 143(1) of the Act, citing cases like Abhishek Cements Ltd. vs. Union of India and CIT vs. Eicher Goodearth Ltd. The Tribunal found merit in the appellant's arguments and noted the lack of satisfactory evidence from the Revenue. Conclusions: The Tribunal concluded that the disallowance under Section 43B was not justified as the GST payable was not claimed as a deduction in the Profit and Loss account. The Tribunal directed the deletion of the disallowance and reversed the findings of the CIT(A). SIGNIFICANT HOLDINGS The Tribunal held that Section 43B of the Income Tax Act does not apply to amounts not claimed as deductions in the Profit and Loss account. The core principle established is that disallowance under Section 43B cannot be made if the expense or deduction is not routed through the Profit and Loss account. The Tribunal's final determination was to allow the appeal in part by deleting the disallowance of Rs. 3,55,01,693/- under Section 43B. The Tribunal's decision underscores the importance of the treatment of expenses in financial statements and the necessity of aligning tax adjustments with actual financial practices. This judgment clarifies the application of Section 43B in cases where the taxpayer has not claimed a deduction for certain liabilities in their Profit and Loss account.
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