DEN SKY MEDIA NETWORK PVT. LTD., JAIPUR V. ITO, WARD-2(1), JAIPUR

ITA 1170/JPR/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 5916 (ITAT-JAIPUR)
• Duration Of Justice: 4 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 01-10-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RUNI PAUL J DHK
• Keywords: Question of law
• Section: 43B; 28

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCH B , JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE : SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA-@ ITA NO. 1170/JP/2019 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2012-13 M/S. DEN FUTURISTIC CABLE NETWORKS PVT. LTD. (EARLIER KNOWN AS DEN SKY MEDIA NET WORK PVT.LTD) B-II/32, MOHAN COOPERATIVE INDUSTRIAL ESTATE, BADARPUR, NEW DELHI 110 044 CUKE VS. THE ITO WARD- 2 (1) JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AACCD 8697 D VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI ROHAN SOGANI, CA & SHRI RAJEEV SOGANI, CA JKTLO DH VKSJ LS@ REVENUE BY : SMT. RUNI PAUL, JCIT-DR LQUOKBZ DH RKJH[K@ DATE OF HEARING : 06/02/2020 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 14 /02/2020 VKNS'K@ ORDER PER VIJAY PAL RAO, JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF LD. CIT(A) -1, JAIPUR DATED 11-07-2019 FOR THE ASSESS MENT YEAR 2012-13. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION O F THE AO IN DISALLOWING A SUM OF RS. 1,25,39,228/- OF SERVIC E TAX U/S ITA NO.1170/JP/2019 M/S. DEN FUTURISTIC CABLE NETWORKS PVT. LTD VS ITO,WARD- 2(1), JAIPUR 2 43B OF THE I.T. ACT, 1961. THE ACTION OF THE LD. CI T(A) IS ILLEGAL, UNJUSTIFIED, ARBITRARY AND AGAINST THE FAC TS OF THE CASE. RELIEF MAY PLEASE BE GRANTED BY QUASING THE SAID DISALLOWANCE OF RS. 1,25,39,228/-. 2.1 THE ASSESSEE IS A COMPANY AND WAS ENGAGED IN TH E BUSINESS OF PROVIDING CABLE TV DISTRIBUTION TO CABLE OPERATORS. THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME ON 21-09-2012 DECLARING NIL INCOME AFTER ADJUSTING THE BROUGHT FORWARD BUSINESS LOSS OF RS. 1,41,45,146/-. DURING THE COURSE OF ASSESSMENT PROCEEDING, THE AO NOTED T HAT THE ASSESSEE HAS NOT PAID THE SERVICE TAX LIABILITY OF RS. 1,25,39,2 28/-. ACCORDINGLY, THE AO ASKED THE ASSESSEE TO SHOW CAUSE AS TO WHY OUTST ANDING STATUTORY LIABILITY NOT PAID BEFORE FILING OF THE RETURN OF I NCOME, SHOULD NOT BE DISALLOWED U/S 43B OF THE ACT. IN RESPONSE, THE ASS ESSEE SUBMITTED THAT AS PER SERVICE TAX RULES PRIOR TO 30-06-2011, THE LIAB ILITY TO PAY THE SERVICE TAX ARISES ONLY WHEN THE ASSESSEE COLLECTED THE SAM E FROM THE CUSTOMERS. SINCE THE ASSESSEE COULD NOT COLLECT THE BILLING AM OUNT FROM THE CABLE OPERATORS AND THE SAME IS OUTSTANDING, THEREFORE, T HE SERVICE TAX WAS ALSO NOT COLLECTED. FURTHER, SINCE THE ASSESSEE HAS NOT CLAIMED ANY EXPENDITURE IN THE PROFIT AND LOSS ACCOUNT REGARDING THE SERVIC E TAX, THEREFORE, THE SAME CANNOT BE DISALLOWED BY INVOKING THE PROVISION S OF SECTION 43B OF ITA NO.1170/JP/2019 M/S. DEN FUTURISTIC CABLE NETWORKS PVT. LTD VS ITO,WARD- 2(1), JAIPUR 3 THE ACT. THE AO DID ACCEPT THE CONTENTIONS OF THE A SSESSEE AND HELD THAT ASSESSEE CANNOT ADOPT THE SEPARATE SYSTEM OF ACCOUN TING SUITABLE TO IT. CONSEQUENTLY, THE AO DISALLOWED THE OUTSTANDING SER VICE TAX LIABILITY OF RS. 1,25,39,228/- AND ADDED THE SAME TO THE TOTAL I NCOME OF THE ASSESSEE BY INVOKING THE PROVISIONS OF SECTION 43B OF THE AC T. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE LD. CIT( A) BUT COULD NOT SUCCEED. 2.2 BEFORE US, THE LD.AR OF THE ASSESSEE SUBMITTED THAT AS PER RULES 6 OF SERVICE TAX RULES, 1994, PRIOR TO AMENDMENT W.E. F. 30-06-2011, THE LIABILITY TO PAY SERVICE TAX TO CENTRAL GOVT. WOULD ARISES IN THE MONTH FOLLOWING THE MONTH IN WHICH PAYMENTS WERE RECEIVED . SINCE THE ASSESSEE HAS NOT RECEIVED OR COLLECTED THE SERVICE TAX FROM THE CUSTOMERS, THEREFORE, THE ASSESSEE WAS NOT LIABLE TO PAY SERVI CE TAX UPTO 30-06-2011. THE LD.AR OF THE ASSESSEE FURTHER REFERRED TO THE D ETAILS OF OUTSTANDING OF SERVICE TAX AND SUBMITTED THAT OUT OF RS. 1,25,39,2 28/- A SUM OF RS. 1,21,38,957/- WAS OPENING BALANCE AS ON 01-04-2011. THEREFORE, THE SAID AMOUNT WAS EVEN OUTSTANDING AT THE BEGINNING OF THE YEAR AND THE ENTIRE OUTSTANDING AMOUNT OF RS. 1,25,39,228/- WAS RELATI NG TO THE PERIOD PRIOR TO 30-06-2011. THUS THE LD.AR OF THE ASSESSEE SUBMI TTED THAT WHEN IT WAS ITA NO.1170/JP/2019 M/S. DEN FUTURISTIC CABLE NETWORKS PVT. LTD VS ITO,WARD- 2(1), JAIPUR 4 NOT PAYABLE UNDER THE PROVISIONS OF SERVICE TAX RUL ES, 1994 EXISTS AT THE RELEVANT POINT OF TIME THEN THE SAME CANNOT BE DISA LLOWED BY INVOKING THE PROVISIONS OF SECTION 43B OF THE ACT. THE LD.AR OF THE ASSESSEE FURTHER CONTENDED THAT THE ASSESSEE HAS NOT BOOKED THIS AMO UNT TO THE PROFIT AND LOSS ACCOUNT AND THE THEREFORE, THE QUESTION OF DIS ALLOWING THE SAME DOES ARISE. IN SUPPORT OF HIS CONTENTIONS, THE LD.AR OF THE ASSESSEE RELIED ON FOLLOWING DECISIONS. 1. M/S. POWER LINERS VS ACIT (ITA NO. 194/JP/2017 DATE D 08-01-2018). 2. SHREI FAREED ANWAR VS ITO, (ITA NO. 825/JP/2013 DAT ED 24-05-2017) 3. ACIT VS M/S. REAL IMAGE MEDIA TECHNOLOGIES (P) LTD. (2008) 114 ITD 573 (CHENNAI TRIB.) 4. M/S. PHARMA SEARCH VS ACIT (2012) 21 TAXMANN.COM 44 (MUM (TRIB) 5. CIT VS OVIRA LOGISTICS (P) LTD. 377 ITR 129 (BOMBAY ) 2.3 ON THE OTHER HAND, THE LD. DR SUBMITTED THAT TH E ASSESSEE HAS ADOPTED THE ACCOUNTING STANDARD WHEREIN BILL AMOUNT S INCLUDING SERVICE TAX HAS NOT BEEN TAKEN TO THE TOTAL REVENUE FOR THE YEAR UNDER CONSIDERATION BUT THE ASSESSEE HAS DELIBERATELY EXC LUDED THE SERVICE TAX FROM THE REVENUE RECEIPTS CREDITED TO THE PROFIT AN D LOSS ACCOUNT. THUS THE ASSESSEE HAS NOT ROUTED THE SERVICE TAX THROUGH THE PROFIT AND LOSS ACCOUNT ITA NO.1170/JP/2019 M/S. DEN FUTURISTIC CABLE NETWORKS PVT. LTD VS ITO,WARD- 2(1), JAIPUR 5 AND DIRECTLY TAKEN TO THE BALANCE SHEET. THIS MODUS OPERANDI CANNOT BE ALLOWED TO CIRCUMVENT THE PROVISIONS OF SECTION 43B OF THE ACT. THE LD. DR HAS REFERRED TO THE AUDIT REPORT AND SUBMITTED T HAT THE ASSESSEE RECOGNIZED THE REVENUE ON MERCANTILE SYSTEM BASIS A T THE STAGE OF RENDERING OF SERVICE. THEREFORE, THE REVENUE EARNED FROM THE SERVICE PROVIDED BY THE ASSESSEE HAS TO BE RECOGNIZED ON TH E DATE OF ISSUING THE BILL. THE ASSESSEE HAS RECOGNIZED ONLY NET AMOUNT A FTER EXCLUDING THE SERVICE TAX. THEREFORE, THIS SYSTEM OF ACCOUNTING I S CONTRARY TO THE ACCOUNTING STANDARD AND IT IS A DEVISE TO BYPASS TH E PROVISIONS OF SECTION 43B OF THE ACT. THE LD. DR RELIED ON THE ORDERS OF THE LOWER AUTHORITIES AS WELL AS THE DECISION DATED 23-03-2018 OF ITAT DELHI BENCHES IN THE CASE OF M/S. HEMKUNT INFRATECH (P) LTD VS DCIT (ITA NO. 6683/DEL/2017 FOR THE ASSESSMENT YEAR 2013-14). 2.4 IN REBUTTAL, THE LD.AR OF THE ASSESSEE HAS SUBM ITTED THAT THE DECISION RELIED ON BY THE LD. DR IS NOT APPLICABLE IN THE FACTS OF THE PRESENT CASE AS THE SAID DECISION WAS FOR THE ASSES SMENT YEAR 2013-14 RELATING TO THE PERIOD AFTER THE AMENDMENT OF SERVI CE TAX ACT AND RULES W.E.F. 30-06-2011. FURTHER IN THE SAID CASE, THE AS SESSEE DESPITE COLLECTION OF THE AMOUNT NOT DEPOSITED THE SERVICE TAX TO THE ACCOUNT OF GOVT. OF ITA NO.1170/JP/2019 M/S. DEN FUTURISTIC CABLE NETWORKS PVT. LTD VS ITO,WARD- 2(1), JAIPUR 6 INDIA WHEREAS IN THE PRESENT CASE IN HAND, THE ASSE SSEE EVEN DID NOT COLLECT THE AMOUNT, THE SAME WAS OUTSTANDING AND FI NALLY IT BECAME UNRECOVERABLE. 2.5 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS RELEVANT MATERIALS AVAILABLE ON RECORD. THERE IS NO DISPUTE THAT THE OUTSTANDING AMOUNT OF RS. 1,25,39,228/- ON ACCOUNT OF SERVICE T AX PERTAINS TO THE PERIOD PRIOR TO 30-06-2011 RATHER A SUM OF RS. 1,21 ,38,957/- RELATES TO EARLIER FINANCIAL YEAR BEING 2010-11 AND THEREFORE, IT WAS THE OPENING BALANCE OF STATUTORY LIABILITY AS ON 01-04-2011. TH E ASSESSEE HAS NOT ROUTED THE OUTSTANDING SERVICE TAX THROUGH ITS PROF IT AND LOSS ACCOUNT BUT HAS TAKEN THIS AMOUNT DIRECTLY TO THE BALANCE SHEET . THEREFORE, THE ASSESSEE HAS NOT CLAIMED ANY DEDUCTION ON ACCOUNT O F SAID AMOUNT OF SERVICE TAX WHICH WAS NEITHER COLLECTED NOR PAID TO THE GOVT. ACCOUNT. AT THE OUTSET, WE NOTE THAT IDENTICAL ISSUE HAS BEEN C ONSIDERED BY THIS TRIBUNAL IN THE CASE OF POWER LINERS VS ACIT (SUPRA ) IN PARA 8 AS UNDER:- 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AS WELL AS RELEVANT MATERIALS AVAILABLE ON T HE RECORD. THERE IS NO QUARREL ON THE POINT THAT IF THE ASSESSE E HAS NOT CLAIMED A DEDUCTION ON ACCOUNT OF SERVICE TAX PAYAB LE THEN THE PROVISIONS OF SECTION 43B OF THE ACT CANNOT BE INVO KED. HOWEVER, AT THE SAME TIME, IT IS ALSO TO BE KEPT IN MIND THA T WHEN THE ITA NO.1170/JP/2019 M/S. DEN FUTURISTIC CABLE NETWORKS PVT. LTD VS ITO,WARD- 2(1), JAIPUR 7 ASSESSEE HAS NOT CLAIMED ANY DEDUCTION FOR THE YEAR UNDER CONSIDERATION AND WHICH HAS NOT BEEN DISALLOWED U/S 4 3B OF THE ACT THEN THE ASSESSEE CANNOT TAKE THE BENEFIT OF SE CTION 43B IN FUTURE WHEN THE SAID SERVICE TAX IS PAID BECAUSE THE ASSESSEE HAS NOT INCLUDED THIS AMOUNT AS PART OF TURNOVER. THE H ON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS KNIGHT FRANK (INDIA) PVT. LTD.(SUPRA) HAS HELD IN PARA 7 AS UNDER: 7. REGARDING QUESTION (II): (A) IT IS AN ADMITTED POSITION BEFORE US THAT THE R ESPONDENT ASSESSEE HAD NOT CLAIMED ANY DEDUCTION ON ACCOUNT O F THE SERVICE TAX PAYABLE IN ORDER TO DETERMINE ITS TAXAB LE INCOME. IN THE ABOVE VIEW, THERE CAN BE NO OCCASION TO INVOKE SECTION 43B OF THE ACT. (B) MR. SURESH KUMAR, LEARNED COUNSEL FOR THE REVEN UE FAIRLY STATES THAT THE ISSUE STANDS CONCLUDED AGAINST THE REVENUE BY THE DECISION OF THIS COURT IN COMMISSIONER OF INCOM E TAX VS OVIRA LOGISTICS PVT. LTD. 377 ITR 129 AND COMMISSIO NER OF INCOME TAX VS CALIBRE PERSONNEL SERVICE PVT. LTD. ( INCOME TAX APPEAL NO. 158 OF 2013) RENDERED ON 2 ND FEBRUARY, 2015. (C) IN VIEW OF THE ABOVE, THE QUESTION (II) AS PROP OSED IS COVERED BY THE DECISION OF THIS COURT. THEREFORE, IT DOES N OT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW. THUS, NOT ENTERTAI NED. FOLLOWING THE DECISION OF THE HONBLE BOMBAY HIGH CO URT CITED ABOVE, THE DISALLOWANCE MADE BY THE ASSESSING OFFICE R IS NOT SUSTAINABLE. HOWEVER, SUBJECT TO THE VERIFICATION OF THE FACT THAT THE ASSESSEE HAS NOT MADE ANY CLAIM WHILE COMPUTING ITS TAXABLE INCOME. ACCORDINGLY, THE ASSESSING OFFICER IS DIREC TED TO VERIFY THIS FACT THEN ALLOW THE CLAIM OF THE ASSESSEE. THEREFORE, WHEN THE ASSESSEE HAS NEITHER INCLUDED T HIS AMOUNT OF SERVICE TAX IN THE TURNOVER/ REVENUE RECEIPTS NOR CLAIMED A S DEDUCTION IN THE PROFIT AND LOSS ACCOUNT THEN THE SAID AMOUNT CANNOT BE DIS ALLOWED U/S 43B OF ITA NO.1170/JP/2019 M/S. DEN FUTURISTIC CABLE NETWORKS PVT. LTD VS ITO,WARD- 2(1), JAIPUR 8 THE ACT FOR THE YEAR UNDER CONSIDERATION. THE ASSES SEE CANNOT CLAIM DEDUCTION OF THIS AMOUNT IN THE SUBSEQUENT YEARS WH EN IT IS PAID TO THE GOVT. ACCOUNT BY INVOKING THE PROVISIONS OF SECTION 43B OF THE I.T. ACT, 1961. IN FACT, THIS IS A CLAIM ALLOWABILITY OF WHIC H HAS TO BE FIRST DECIDED U/S 28 TO 42 OF THE I.T. ACT, 1961 AND ONLY WHEN TH E AMOUNT IS ALLOWABLE AS A DEDUCTION UNDER THESE PROVISIONS THEN THE PROV ISION OF SECTION 43B CAN BE INVOKED. IF THE CLAIM IS NOT ALLOWABLE AS TH E DEDUCTION U/S 28 TO 42 OF THE I.T. ACT, 1961 THEN THE QUESTION OF INVOKING THE PROVISIONS OF SECTION 43B EITHER FOR DISALLOWANCE OR FOR CLAIMING THE DEDUCTION ON THE EVENT OF PAYMENT DOES NOT ARISE. THE PROVISIONS OF SECTION 43B ARE ONLY RESTRICTIVE IN NATURE AND NOT AN ENABLING PROVISION . IF THE CLAIM IS OTHERWISE NOT ALLOWABLE AS DEDUCTION THEN THE SAME CANNOT BE ALLOWED BY INVOKING THE PROVISIONS OF SECTION 43B OF THE ACT. ACCORDINGLY, IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO FOLLOWING THE EARLIER DECISIONS OF THE TRIBUNAL (SUPRA), WE DELETE THE DI SALLOWANCE/ ADDITION MADE BY THE AO. THE AO IS DIRECTED TO ENSURE THAT T HE SAID AMOUNT CANNOT BE ALLOWED AS DEDUCTION IN FUTURE AT THE TIM E OF ACTUAL PAYMENT. THUS THE APPEAL OF THE ASSESSEE IS ALLOWED. ITA NO.1170/JP/2019 M/S. DEN FUTURISTIC CABLE NETWORKS PVT. LTD VS ITO,WARD- 2(1), JAIPUR 9 3.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14 /02/2 020. SD/- SD/- FOE FLAG ;KNO FOT; IKY JKO (VIKRAM SINGH YADAV) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 14 /02/ 2020 *MISHRA VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S. DEN FUTURISTIC CABLE NETWORKS PVT.LTD. , JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- THE ITO, WARD- 2(1),JAIPUR 3. VK;DJ VK;QDRVIHY ) @ CIT(A), 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO.1170/JP/2019) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR