9911796707
TMI Blog2021 (2) TMI 462X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner of Income Tax (Appeals) ["CIT (A)"] is contrary to law, facts and circumstances of the case. 2. Disallowance of service tax written off 2.1 The CIT (A) erred in confirming the disallowance made by the AO for the refund of input service tax written off amounting to Rs. 51,65,869. 2.2 The CIT (A) failed to appreciate that the Appellant is operating in Special Economic Zone (SEZ) and as such it is exempt from service tax. 2.3 The CIT (A) ought to have appreciated that since the Appellant is not liable to service tax, the Appellant is eligible to claim the input service tax charged by the suppliers as refund from the Service Tax department. 2.4 The CIT (A) failed to consider the fact that the Service Tax department rejecte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1961 (hereinafter the 'Act') and book profit of Rs. 80,25,61,835/- under the provisions of Section 115JB of the Act. The case was taken up for scrutiny and during the course of assessment proceedings, the AO noticed that the assessee has debited an amount of Rs. 51,65,869/- towards Service Tax written off account. Therefore, called upon the assessee to explain as to why Service Tax written off cannot be disallowed u/s.37(1) of the Act. In response, the assessee submitted that the assessee has availed various input services during the financial year relevant to assessment years 2008-09 & 2009-10 and has followed an accounting method whereby expenses have been debited to profit & loss account excluding Service Tax. The assessee further submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A), the assessee has filed detailed written submissions along with certain judicial precedents which has been reproduced at page 3 to 7 of ld.CIT(A) order. The sum and substance arguments of assessee before the CIT(A) are that Service Tax paid on input services and kept as input tax credit pending adjustment against output service tax payable as an item of expenditure, deductible u/s.37(1) of the Act, when such input tax credit is written off and debited to profit & loss account. The ld.CIT(A) after considering relevant submissions of the assessee rejected the arguments taken by the assessee and confirmed addition made by the AO towards disallowance of Service Tax written off account on the ground that the same is not allowable as deducti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... available on record and gone through the orders of the authorities below. There is no dispute with regard to the fact that the assessee has written off input Service Tax during the impugned financial year relevant to assessment year 2010-11. But, the dispute is with regard to deductibility of input service tax. The AO has disputed deduction claimed by the assessee on three grounds. The first and foremost objection of the AO was that input service tax written off was not an item of expenditure deductible u/s.37(1) of the Act, because the assessee has not rooted said expenditure through profit & loss account. The second observation of the ld.AO is even it is to be treated as profit & loss account item, it was never treated as income at any p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edit then the Service Tax component is taken out from the profit & loss account and treated as current assets pending adjustment against output taxes payable on goods or services. In this case, the assessee has accounted input services exclusive of service tax and treated service tax component as input tax credit pending adjustment. Further, when the application filed by the assessee for refund was rejected by the Department, the assessee has written off said input tax credit and debited in to profit & loss account. Therefore, the second observation of the AO would also fails. Coming to the third observation of the AO, the AO observed that even if it is deductible as expenditure but said expenditure is relatable to earlier financial year an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this view of matter and considering facts and circumstances of this case and also by following the ratios laid down by various Courts and Tribunals, we are of the considered view that input service tax credit is deductible u/s.37(1) of the Act when such input tax credit is written off in the books of account. But, facts with regard to refund claim made by the assessee and rejection of such refund claim by the concerned authorities for the impugned assessment year was not on record. Therefore, to ascertain the fact with regard to the claim of the assessee with regard to rejection of refund claimed, we set aside the issue to the file of the AO for the limited purpose of verification of claim of the assessee regarding rejection of refund cla ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
