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TMI Blog2013 (4) TMI 842X X X X Extracts X X X X X X X X Extracts X X X X ..... espondent by : Smt. Susan Thomas Jose, JCIT ORDER PER GEORGE GEORGE K : This appeal of the assessee firm is directed against the order of the CIT (A)-II, Bangalore dated 17.4.2012. The relevant assessment year is 2009-10. 2. The assessee firm has raised seven grounds, in which ground No.1 is general in nature and, therefore, it becomes inconsequential. Ground No.6 is not maintainable as charging of interest under section 234B of the Act is mandatory and consequential in nature. Ground No.7 is also not maintainable as the initiation of penal proceedings was in its initial stage when the assessment proceeding was concluded. The remaining grounds relate to two issues, namely: (i) that the CIT (A) had erred in confirming the addition of professional receipt of ₹ 4,85,320/ to the returned income; & (ii) that the CIT (A) had also erred in confirming the AO's stand in treating the service liability of ₹ 29,00,660/- outstanding as income of the assessee for the current year. 3. Briefly stated, the facts of the issues are as under: The assessee firm, engaged in the profession of chartered accountancy, had furnished its return of income, admitting a total income of &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvice tax of ₹ 29,00,060/- was collected by the appellant but not paid to the Government account up to the end of the financial year or even up to the date of filing of the return of income. The appellant by not including this amount in his services, has clearly made a claim indirectly………….." 4.1 Extensively quoting the ruling of the Hon'ble Apex Court in the case of Chowringhee Sales Bureau Pvt. Ltd v. CIT [87 ITR 542 (SC)] and also distinguishing the findings of (i) Hon'ble Chennai Tribunal in the case of ACIT v. Real Image Media Technologies (P) Limited reported in 306 ITGR 106; and (ii) the ruling of Hon'ble Delhi High Court in the case of CIT v. Noble and Hewitt India (P) Ltd reported in 305 ITR 324 (Del), the CIT (A) had observed thus: "4.4. In fact this decision has settled this controversy on sales tax that unpaid sales tax credited in any account, whether claimed in the profit and loss account or not, is includible in the total income. The appellant's plea that sales tax is different from service tax cannot be accepted in the present case as what the appellant as a firm of Chartered Accountants is selling is services and not goods, so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ready received the amount on 31.3.2009 whereas the assessee had received the amount only in September, 2010; (vi) that the assessee denies for having consented to the amount being taxed during the assessment year under consideration as alleged by the CIT (A); Disallowance of unpaid service tax liability u/s 43B of the Act: (vii) that S.43B of the Act begins by specifying that the deduction otherwise allowable under the Act shall not be allowed unless it is actually paid i.e., a claim should be first preferred by the taxpayer and then, the same will be disallowed u/s 43B of the Act in the previous year in which it was claimed only if taxpayer fails to remit the same before the due date u/s 139(1) of the Act. If the taxpayer had not preferred any claim towards service tax, there was no question of disallowing the same; (viii) that in the present case, the service tax amount which was added back as income was not debited to the P & L account, that in other words, the assessee had preferred any claim towards service tax and that when a claim was not referred, the question of applicability of disallowance u/s 43B of the Act does not arise; Relies on the case laws: • CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rding to the CIT(A), the assessee, during the assessment proceedings, had consented for being taxed during the AY under consideration. This very reasoning of the CIT (A) has been denied by the learned AR during the course of hearing before us. In fact, it was argued, no consent whatsoever was given for such an addition. In this connection, the learned AR had furnished an affidavit on behalf of the assessee. Moreover, it was submitted that the statutory audit for the first previous year 2008-09 (i.e., from 24.7.2008 - 31.3.2009) was completed only on 29.7.2010 and, thereafter, the assessee had raised an invoice on 30.7.2010 and accounted it as income in its books of account for the previous year 2010-11. To support its claim, the assessee had furnished the copies of the following documents:- (i) Certificate of Establishment of place of business in India of Project office from the Registrar of Companies dated 27.11.2009; (ii) Audit report of OPUS International (M) Berhad from the statutory auditors (the assessee) dated 29.7.2010 along with financial statements; & (iii) Invoice raised on OPUS International (M) Berhad - Indian Project office for the service for the previous year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n software development. The amount of service tax included in bills issued but not received. Accordingly, the Hon'ble Tribunal had recorded its findings that 'As per s. 68 of Finance Act, 1994 read with rule 6 of Service Tax Rules, 1994, the service tax becomes payable only on receipt of service tax from the client. Therefore, the amount of service tax included in bills but not received could not be disallowed under s. 43B'. After analysing the relevant provisions of Income- tax Act as well as Service Tax Act, the Tribunal had, further, recorded its findings as under: "12………………………………………………………………………………………… From a plain reading of the above provision it becomes clear that the rigour of this provision would be attracted only in a case where an item is allowable as deduction but because of the failure to make payment such deduction will not be allowed. It can be argued that in the case of ST also the assessee does not claim deduction since it has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the assessee, since the assessee could utilise this amount in any manner whatsoever, there is no restriction placed on its utilisation. This is amply clear from the TDS certificate furnished by the assessee and also the credit appearing in the assessee's bank account. Therefore, to arrive at the professional income, the service tax realised should have been included in the gross receipts unless paid to Government exchequer within the due date of filing of return. Since service tax realised is included in the total income, the same is to be allowed as a deduction in the year it is paid to the Government account. In the instant case, this is what has been done by the learned CIT(A). The CIT(A) had allowed the alternative plea of the assessee and had directed the Assessing Officer to deduct the service tax when the payment is made to the Govt. account in the subsequent year. Therefore, we find there is no merit in the contention raised on behalf of the assessee and this issue is decided against the assessee. It is ordered accordingly. 8. In the result, the assessee's appeal is partly allowed for statistical purposes as indicated above. Order pronounced in the open court on 12th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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