2021 (7) TMI 186 - AT - Income Tax

Disallowance u/s 43B on account of GST remaining unpaid - tax auditor has reported the GST payable as outstanding - HELD THAT - As noted that the assessee has returned income from business and profession also. The assessee has filed copies of GST returns and has also filed details of GST being levied on rental income. But, the findings of the CIT(A) do not reveal any verification conducted on this aspect nor is there any finding of fact relating to which component of income the GST relates to - as we have noted from the detail filed by the assessee that this GST has not even been included in the rental income returned by the assessee and therefore there cannot be any occasion for making any disallowance. This aspect also appears to have neither been noted by the Ld.CIT(A) and nor therefore verified - assessee has also argued that even as per section 23 of the Act, GST is not a tax covered under it for the purpose of being allowed as deduction only on payment basis. Facts relating to the issue need to be determined and verified in the first place, including amongst other things as to which component of income the GST relates to whether rental income or income from business and profession. If it found to relate to rental income then whether it has been included in the rental income returned by the assessee . If it has not been returned, there is no occasion for making any disallowance at all, but if it has been returned as rental income, then the issue needs to be determined in the light of section 23 of the Act which allows deduction of local taxes from rental income on payment basis and it needs to be decided whether the GST is covered under the same or not. Disallowance of GST therefore restored back to the CIT(A) to be decided afresh after ascertaining all relevant facts and thereafter adjudicating the issue in accordance with law, giving due opportunity of hearing to the assessee. Appeal of the assessee is partly allowed for statistical purposes.

Summary

Issues involved:
1. Disallowance made under section 43B of the Income Tax Act on account of unpaid GST.

Analysis:
1. The appeal was against the order of the Commissioner of Income Tax (Appeals) relating to the assessment year 2018-19.
2. The assessee contended that the disallowance under section 43B was not justified as the GST amount was paid before the due date.
3. The Commissioner of Income Tax (Appeals) upheld the disallowance, stating that only actual taxes paid were deductible under the head "income from house property."
4. The Counsel for the assessee argued that the disallowance was not applicable to rental income and that the deduction of GST should not be solely on a payment basis.
5. The Tribunal noted discrepancies in the assessment and directed the Commissioner of Income Tax (Appeals) to verify the facts, determine the component of income to which the GST related, and decide the issue in accordance with the law.
6. The Tribunal restored the issue back to the Commissioner of Income Tax (Appeals) for a fresh decision after ascertaining all relevant facts and providing a hearing to the assessee.
7. The appeal of the assessee was partly allowed for statistical purposes.

This detailed analysis highlights the grounds raised by the assessee, the arguments presented, the findings of the Commissioner of Income Tax (Appeals), and the directions given by the Tribunal for a fresh decision based on a thorough examination of the facts and legal provisions.