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TMI Blog2022 (8) TMI 1123X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the disallowance made by the AO u/s 43B on account of Sales Tax/Works Contracts tax amounting to Rs. 3,78,15,218/- which was outstanding on the date of filing of return. 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the disallowance made by the AO u/s 43B even though the judgment of the Hon'ble SC in the case of Chowringhee Sales Bureau Pvt. Ltd. Vs. CIT (57 ITR 552) is squarely applicable to the case of the assessee. 3. The appellant prays that the order of CIT(A) on the above ground be set-aside and that of the assessing officer be restored." 3. In the Cross-Objection, the Assessee has supported the order passed by the CIT(A) on the following grounds: "1. Erred in challenging the order of the Hon'ble Commissioner of Income-tax (Appeals) with regards to unpaid Sales Tax/Works Contract Tax of Rs. 3,78,15,218/- on the ground that the same should be disallowed under section 43B of the Act without appreciating the fact that the same is not routed through Profit & Loss Account and thus not liable for disallowance under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was claimed by the Assessee. The CIT(A), however, rejected the contention of the Assessee that since there was huge input credit available as on the date of filing the return of income there was, in effect, no outstanding liability and/or that the outstanding liability should be deemed to have been set off against the available input credit. The relevant extract of the order of CIT(A) read as under. "5.24 However, facts of assessee's case somewhat different from the facts outlined in case Chowringhee sales bureau (supra). This is because the assessee was entitled to certain credit on input tax paid for purchase of intermediate goods. Therefore, it was eligible to set the input tax credit from the amount collected from its customers before determination of the amount that it was required to actually pay to the sales tax Department. Such a stand vindicated by judgment of the Calcutta High Court in the case of National Standard Duncan Ltd (260 ITR 97). Nor does the Assessing officer have objection to such a stand. In his assessment order he has fairly accepted the stand of the assessee and allowed the amounts so set off to be so deducted. The dispute with regard to the amount th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... credit available for set-off as on the date of filing income tax return and by virtue thereof, the Assessee did not have any outstanding liability as on the date of filing return of income. In this regard, he relied upon the certificate, dated 19.09.2018, issued by Chartered Accountant placed at 56 and 57 of the paper-book. The Learned Authorised Representative for the Appellant submitted that adjustment/set off, by legal fiction, is deemed to be actual payment of tax liability. Therefore, existence of sufficient input tax credit for setting off the outstanding Sales Tax/Works Contract Tax liability as on the date of filing of income tax return should be treated as payment in terms of Section 43B of the Act. Secondly, without prejudice to the aforesaid, the Learned Authorised Representative for the assessee submitted that the amount of Sales Tax/Works Contract Tax liability was not routed through the Profit & Loss Account by the Assessee. Since, no deduction has been claimed by the Assessee in respect of the Sales Tax/Works Contract Tax liability, the question of disallowance under Section 43B of the Act does not arise. To support this contention, the Learned Authorised Representat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judice argued that the company has not claimed service tax/work contract tax in the P&L account and therefore these are not claimed as expenses and accordingly the provisions of section 43B are not applicable in the assessee case. The argument made by the assessee company is not correct in view of the decision of Hon'ble Supreme Court in the case of Chowrangee sales bureau that sales tax is part of the turnover of the assessee Even if accounts are made on exclusion method, sales tax will be treated as part of turnover and even if sales tax is not debited in the P&L account, it is deemed to have been claimed in exclusion method. Considering this, even if appellant has not included service tax as part of revenue and not claimed these taxes in P&L account, these are deemed to be included in revenue and deemed to have been claimed in P&L account. Accordingly, if statutory liability is not paid till the due date of filing return of income, the provisions of section 43B is clearly applicable. Accordingly the disallowance made by the undersigned in the above paragraph under sect 43B is confirmed." (Emphasis Supplied) The Learned Departmental Representative further submitted that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which was neither paid nor set off against available input tax credit. The contention advanced on behalf of the Assessee is that since there was huge input tax credit available as on the date of filing return of income, the outstanding Sales Tax/Works Contract Tax liability can be deemed to have been set off against such available input tax credit and therefore, the question of making disallowance under Section 43B of the Act does not arise. We do not find any merit in the aforesaid contention and are of the view that the authorities below were justified in rejecting the contention of the Assessee. In paragraph 5.2.4 of the order, the CIT(A) has rightly observed that the judgments relied upon by the Assessee do not support the contention that mere availability of unutilized tax credit would be deemed to be payment even in absence of actual set off of the outstanding liability with the available tax credit. In our considered view, the provisions of section 43B would not be attracted in case there is actual payment or actual set off (which would be deemed to be payment). Mere availability of unutilized tax credit cannot be deemed to be payment and/or lead to a conclusion that there e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court, in the case of CIT Vs. M/s Calibre Personnel Services Private Limited: [Income Tax Appeal No. 158 & 160 of 2013, dated 02.02.2015], concurring with the aforesaid judgment of the Hon'ble Delhi High Court concluded that the provisions of Section 43B of the Act are not attracted in absence of an assessee claiming any deduction. The relevant observations of the Hon'ble Bombay High Court are as under: "4. The respondent-assessee filed its return of income............. The respondent-assessee pointed out that the amount of service tax payable is not taken to the profit and loss account and but credited directly to the Service Tax Payable under the head Current Liabilities in the Balance Sheet. This was as per the guidelines issued by Institute of Chartered Accountants of India. Further it was also pointed out that in the absence of Respondent claiming any deduction on account of the unpaid service tax to arrive at its income the question of application of section 43B would not arise. The assessing officer did not accepted contention and added service tax payable of Rs.1.34 crores to the income of the Respondent" Thus, the key finding on which the above decisions were concluded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Decrease in Profit 1 Increase in cost of opening stock of raw materials, work in process etc. on inclusion of excise duty on which MODVAT/ CENVAT credit is available/availed. - 52,117,546 2 Increase in purchase cost of raw material on inclusion of excise duty on which MODVAT/ CENVAT/ VAT credit is available/availed - 313,135,446 3 Increase in closing stock of raw material, Work in process etc., on inclusion of excise duty & VAT 38,901,136 - 4 Accounting of MODVAT/ CENVAT/ VAT credit availed and utilized on raw material consumed 326,351,856 - 5 Increase in sale of finished goods on inclusion of sales tax, excise duty etc. 58,749,475 - 6 Sales tax & excise duty paid on sale of finished goods as a result of its inclusion in sales. - 58,749,475 Total 424,002,467 424,002,467 Net effect on Statement of Profit and Loss NIL Note: MODVAT/CENVAT on closing stocks has been ascertained by applying the percentage of Modvat/Cenvat availed during the year 2012-13 to purchases made during 2012-13." 15. From the above, it is clear that the increase in profits on account of inclusion of taxes/duties in closing stock and sales has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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