9911796707
TMI Blog2012 (10) TMI 707X X X X Extracts X X X X X X X X Extracts X X X X ..... 07-08 was filed by it on 30.10.2007 declaring total income of Rs. 45,66,400/-. Subsequently, the revised return was filed by the assessee on 27.11.2007 declaring total income of Rs. 62,18,400/- . In the balance sheet filed along with its returns of income, provision made for service tax amounting to Rs. 1,33,32,579/- was reflected on the liability side. Since the said liability had remained unpaid, the assessee was called upon by the A.O. to explain why the same should not be disallowed by invoking the provisions of sec.43B. In reply filed in writing by letter dated 06.08.2009, the following explanation was offered by the assessee: "During the course of hearing on 17.7.2009, we were asked to showcause as to why not the outstanding liability of service tax of Rs. 1,33,32,579/- be added to the income u/s. 43B of Income tax Act, 1961. In this respect, we wish to state as under: a) The amount of service tax billed to clients is shown separately in the invoices and it is credited directly to 'Service tax payable' A/c under 'Current Liability'. Hence, it is not credited to Profit & Loss A/c at all. This method is followed as per Guidance Note issued by Institute of Chartered Accounts o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s.1,93,81,281/- and deposited a part of it to the government treasury. The Ld. AO found that the appellant has paid service tax amounting to Rs.60,48,702/- and therefore, at the end of Previous Year 2006-07, the outstanding payable stands at Rs.1,33,32,579/- while the appellant submitted the total amount payable was Rs.82 lakhs as against Rs.1,33,32,579/- stated by the Ld. AO as the remaining amount was paid before the filing of return of income. Before me, the appellant had raised two main arguments. The first argument relates to that no disallowance can be made u/ s.43B for the simple reason that the service tax is not credited to the P L A/c. The appellant relied on the decision of two important cases namely, CIT Vs. Noble & Hewitt Pvt. Ltd. reported in 305 ITR 324 and Dynavision Ltd. Vs. ACIT reported in 11 ITD 461. In the case of Noble & Hewitt Pvt. Ltd., the Hon'ble Delhi High Court held service tax collected by the appellant not debited to the P & L A/c and thus no disallowances u/s.43B of the Act can be made. The appellant is also not debiting service tax to the P & L A/c as the appellant is following different systems of accounting to account for the service tax. Similarly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne in the instant case. The assessee has involved a method of accounting as per guidelines issued by the Institute of Chartered Accountants u/s.44AB of the I.T. Act wherein the service tax payable is credited separately and is not rooted through the P & L A/c. This method of accounting is perfectly right. However, the facts remain that the appellant has collected the service tax and not paid to the credit of the government treasury before the filing of return of income. The appellant tries to distinguish the nature of tax such as sale, or excise with the service tax. Tax is definitely a liability a part of the income towards government ascertained in a well laid out criteria. The fact that its procedure and modalities of collection and payment are different does not make it different. Provision of section 68 read with rule 6 of the Service Tax Rules, only change the position as far as service tax is payable only when the payment is received by the service provider and not otherwise. It does not ipso facto empower the appellant to collect the taxes due to the government and not paid to. the Government. Whenever the service provider received the service tax and did not deposit the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service tax payable in the case of the assessee who was following the mercantile system of accounting. Relying on said decision of Hon'ble Delhi High Court in the case of Noble & Hewitt Pvt. Ltd., the Ld. Counsel for the has submitted that the assessee in the present case having neither debited the amount of service tax to the profit and loss account as an expenditure nor having claimed the same as deduction, disallowance u/s.43B cannot be made. We find merit in this contention of the Ld. Counsel for the assessee. However, keeping in view that there is no finding specifically recorded by the AO or by the Ld. CIT (A) regarding the assessee having not debited the service tax to the profit and loss account nor having claimed the same as deduction, we restore this issue to the file of the A.O. for the limited purpose of verifying this aspect and allowing appropriate relief to the assessee as per the decision of Hon'ble Delhi High Court in the case of Noble & Hewitt Pvt. Ltd. (supra). The appeal filed by the assessee for AY 2007-08 is accordingly treated as allowed for the statistical purpose. 6. Now, we shall take the appeal of the assessee for the AY 2008- 09 being ITA 3407/Mum/2011 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not considered by the AO on merits, the assessee cannot be precluded from raising it in the appeal filed against the order of the AO. Merely because the AO has not considered the issue specifically raised by the assessee during the course of assessment proceedings and has not given any finding or decision thereon, it cannot be said that the said issue is not arising from the order of the assessment. Such non-consideration by the AO is to be presumed as decision against the against the assessee on that issue which gives right to the assessee to raise the same in an appeal filed before the Ld. CIT (A) against the order of assessment. We, therefore, remit this matter to the Ld. CIT (A) with a direction to entertain ground no.2 raised by the assessee in the appeal filed before him and decide the issue involved therein on merit if the assessee is able to prove the said issue relating to disallowance u/s. 40(a)(ia) was raised specifically during the course of assessment proceedings before the AO. Ground no.3 of the assessee's appeal is accordingly treated as allowed for statistical purpose. 11. The issue raised in ground no.4 relates to addition of Rs. 1,21,032/- made by the AO and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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