2016 (8) TMI 1096 - HC - Income Tax

Addition u/s 145A - inclusion of service tax as part of trading receipts - Tribunal deleted the addition - Held that - We do not find any ambiguity in Section 145A of the Act as arising for our consideration. However even if one were to assume the main part of Section 145A of the Act is capable of more then one interpretation the interpretation sought to be canvassed by the Revenue is not sustainable. Therefore Section 145A of the Act would have no application in cases where service is provided by the Assessee. Addition u/s 43B - unpaid service tax liability disallowed - Held that - It is an admitted position before us that the respondent assessee had not claimed any deduction on account of the service tax payable in order to determine its taxable income. In the above view there can be no occasion to invoke Section 43B of the Act. The issue stands concluded against the Revenue by the decisions of this Court in Commissioner of Income Tax Vs. Ovira Logistics P. Ltd. 2015 (4) TMI 684 - BOMBAY HIGH COURT and Commissioner of Income Tax Vs. Calibre Personnel Services Pvt. Ltd. (2015 (2) TMI 587 - BOMBAY HIGH COURT )

Summary

Issues:
1. Whether Section 145A of the Income Tax Act, 1961 applies to service providers in addition to manufacturing companies?
2. Whether Section 43B of the Income Tax Act, 1961 applies to unpaid service tax liability?

Analysis:

Issue 1:
The respondent, engaged in real estate consultancy and property management services, was assessed for including service tax billed to service receivers as trading receipts and invoking Section 43B for unpaid service tax. The Commissioner of Income Tax upheld the assessment, but the Tribunal reversed it. The Tribunal ruled that Section 145A does not apply to service tax billed for services as it pertains to goods, not services. The Tribunal also found that Section 43B does not apply since no liability to pay service tax arose before the filing deadline and no deduction was claimed. The Tribunal's decision was based on the clear language of the Act and the lack of ambiguity regarding the application of Section 145A to services. The Tribunal's interpretation was further supported by the historical legislative context and the principle that subsequent legislation can aid in interpreting earlier Acts. Therefore, the Tribunal concluded that Section 145A does not apply to services, and the appeal was allowed.

Issue 2:
The respondent did not claim any deduction for service tax payable, making it unnecessary to invoke Section 43B of the Act. The Revenue's argument was refuted by citing previous court decisions that concluded against the Revenue's position. The Court found that the issue was settled by previous decisions and did not raise any substantial legal question. Therefore, the Court dismissed the appeals, emphasizing that no costs were to be awarded.

This detailed analysis of the judgment highlights the key legal issues, the arguments presented, and the court's reasoning leading to the final decision.