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2019 (10) TMI 309 - AT - Income TaxAddition on account of delayed payment of service tax under the provisions of section 43B - AO was of the view that the provisions of section 43B of the Act require to make the payment of the tax, duty and cess etc within the due date of filing of the income tax return for the year under consideration - AO was of the view that the provisions of section 43B of the Act require to make the payment of the tax, duty and cess etc within the due date of filing of the income tax return for the year under consideration - HELD THAT - A plain reading of the above provision reveals that it is confined to the purchase and sale of goods and the determination of the inventories. As such the provision of section 145A of the Act requires the assessee to include the amount of any tax, duty, cess or fee in the value of the purchases, sales and inventories. The provision of section 145A of the Act does not require the assessee to include the amount of service tax either in the purchases or sales. There was no obligation on the part of the assessee to show the amount of service tax collected from the customers as part of the turnover. Accordingly, the assessee has not included the amount of service tax in its turnover which has been shown as current liability. Therefore there was no deduction claimed by the assessee in its profit and loss account at the time of actual payment. We are not inclined to uphold the finding of the authorities below for the reasons as discussed in the preceding paragraph. Hence the ground of appeal of the assessee is allowed. Addition on account of interest on delayed payment of service tax after the due date of filing the income tax return - HELD THAT - We can presume that the submission of the assessee is correct in the given facts and circumstances. Thus the question arises whether such interest expenses can be added to the total income of the assessee under the provision of section 43B of the Act. In our considered view, the answer is in negative. It is because, the assessee has not claimed the deduction of the amount as discussed above. Thus, we are of the view that there cannot be any addition to the extent of the interest amount as claimed by the assessee on account of delayed payment of service tax to the total income of the assessee. Appeal of the assessee is partly allowed.
Issues Involved:
1. Applicability of Section 43B of the Income Tax Act, 1961, on delayed payment of service tax. 2. Disallowance of interest on late payment of service tax under Section 43B. Detailed Analysis: Issue 1: Applicability of Section 43B on Delayed Payment of Service Tax The primary issue raised by the assessee was whether the provisions of Section 43B of the Income Tax Act, 1961, apply to the delayed payment of service tax amounting to ?25,40,376/-. The assessee argued that since the service tax was neither debited to the Profit & Loss Account nor claimed as a deduction in computing total income, Section 43B should not apply. Facts and Arguments: - The assessee, a private limited company engaged in civil construction services, showed a service tax liability of ?52,58,086/- as of 31 March 2013, with ?25,40,376/- paid after the due date for filing the income tax return. - During assessment, the assessee claimed that the service tax collected from customers was paid to the government subsequently and was shown as a liability in the books without claiming any deduction. Hence, Section 43B should not be applicable. - The Assessing Officer (AO) disagreed, treating the unpaid service tax as income under Section 43B, adding ?25,40,376/- to the total income. CIT(A) Decision: - The CIT(A) upheld the AO's decision, treating the unpaid service tax as trading receipts and relying on several judgments, including Madhya Gujarat Vij Co. Ltd. Vs ITO and CIT v Sunder Printing Press. Tribunal's Analysis: - The Tribunal noted that the CIT(A) relied on the Supreme Court judgment in Chowringhee Sales Bureau (Pvt.) Ltd. Vs. CIT, which was not rendered in the context of Section 43B. - The Tribunal highlighted that the Delhi High Court in CIT vs. Noble & Hewitt (I)(P) Ltd. clarified that if the service tax is not debited to the Profit & Loss Account, Section 43B is not applicable. - The Tribunal further noted that the provisions of Section 145A, which mandate including tax in the turnover, do not apply to service tax. Conclusion: - The Tribunal concluded that since the assessee did not claim any deduction for the service tax in the Profit & Loss Account, Section 43B does not apply. Therefore, the addition of ?25,40,376/- was deleted. Issue 2: Disallowance of Interest on Late Payment of Service Tax The second issue was the disallowance of ?1,61,905/- as interest on late payment of service tax. Facts and Arguments: - The assessee paid the service tax along with interest in the financial year 2014-15. - The assessee argued that the interest was not claimed as a deduction, and thus, Section 43B should not apply. Tribunal's Analysis: - The Tribunal noted that the interest amount was not claimed as a deduction in the year under consideration. - The Tribunal also observed that the interest amount was already included in the service tax amount discussed in the first issue. Conclusion: - The Tribunal held that since the interest was not claimed as a deduction, it could not be added to the total income under Section 43B. The ground of appeal regarding the interest became infructuous and was dismissed. Final Judgment: The appeal of the assessee was partly allowed. The addition of ?25,40,376/- under Section 43B was deleted, while the ground of appeal regarding the interest on late payment of service tax was dismissed as infructuous. Order Pronounced: - The order was pronounced in the Court on 01/10/2019 at Ahmedabad.
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