Joginder Pal Gupta, New Delhi V. ACIT, Central Circle-18, Delhi

ITA 1280/DEL/2023

AI Insights

The case involves Fulcrum ALM Solutions Pvt. Ltd., a wholly owned subsidiary of Fulcrum Technologies Inc., which appealed against the order of the Commissioner of Income Tax (Appeals) -I, Gurgaon. The appeal arose from an assessment order passed by the Assessing Officer under Section 143(3) of the Income Tax Act, 1961 for the assessment year 2016-17. The primary contention was regarding the disallowance of service tax liability under reverse charge mechanism and an addition of Rs. 67,21,029/- to the income of the appellant. The Tribunal referenced a judgment by the Hon'ble Delhi High Court in CIT vs. Noble and Hewitt Pvt. Ltd., which supported the assessee's position that such service tax liability, not claimed as an expense, should not be disallowed.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 121520 (ITAT-DELHI)
• Duration Of Justice: 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 03-12-2023
• Assessment Year: 2020-2021
• Appeal Filed On: 27-04-2023
• Other Referred Cases: CIT vs. Noble and Hewitt Pvt. Ltd., 305 ITR 324 (Del)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 2; 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “B” DELHI BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER I.T.A. No.1280/DEL/2020 Assessment Year 2016-17 Fulcrum ALM Solutions Pvt. Ltd. 5 th Floor, HUDA City Centre Metro Station, Sector-29 Gurgaon, Haryana. Vs. ACIT Circle-1(1) Gurgaon. TAN/PAN: AACCF5782B (Appellant) (Respondent) Appellant by: Shri Gagan Kumar, Adv Shri Vivek Kumar, CA Respondent by: Shri Sanjay Kumar Yadav, Sr.DR Date of hearing: 10 05 2023 Date of pronouncement: 08 08 2023 O R D E R PER PRADIP KUMAR KEDIA, A.M.: The capt ioned appeal has been fi led b y t he assessee agai nst t he order of t he ld. Commi ssioner of I nco me Tax (Appeal s) -I, Gur gaon ( ‘CI T(A ) ’ i n shor t) dated 05. 03. 2020 ar isi ng f r o m the assess me nt or der dated 22. 12.20 18 passed b y the Assessing Off i cer (AO) under Sect i on 143( 3) of t he I nco me Tax Act, 1961 (t he Act) concerni ng AY 2016- 17. 2. The gr ounds of appeal raised b y t he assessee read as under: “ 1 . Th at t he Ld . C I T (A ) g r o s s l y e r r e d i n l a w a nd o n t h e f a c t s a n d c i r c u m s t a n c e s of t he c a s e i n c o nf i r m i ng an a dd i t i o n o f R s 6 7 , 2 1 , 0 2 9 / - i n t he i n c o m e o f t he A p p e ll a n t . I.T.A. No.1280/Del/2020 2 2 . T h a t t he Ld . C I T ( A ) gr o s s l y e r r e d i n l aw a n d o n t he f a c t s a n d c i r c u m s t a n c e s o f t he c a s e in c o n f i r m i ng t h e d i s al l ow a nc e of s e r v i c e t a x pa y a bl e ( un de r r e v e r s e c h ar g e ) u n de r s ec ti o n 4 3 B of t h e A c t w i t h ou t a p p r e c i at i n g th a t t he s am e w a s n e v er c l ai m e d a s e x p e ns e b y t h e A p p e l l a n t . 3 . T h e Ld . A O ha s e r r e d i n l e v y i n g i n t e r e s t u nd e r se c t i on 2 3 4 A / B /C a n d D o f t h e A c t . 4 . Th a t o n f a c t s a n d i n l a w , t h e Ld . A O e r r e d i n i ni t i a t i ng p e n al t y p r o c e e d i n gs un de r s e c ti o n 2 7 1 ( 1 ) (c ) o f t h e I n c o m e T ax A c t , 1 9 6 1. 5 . Th e A p pe l l a nt c r a v e s f o r l e av e t o a dd , am e n d , v ar y , o m i t o r s ub s t i t ut e a ny of t h e af o r e s a i d g r o u nd s o f ap p e al at an y t i m e b e f or e or a t t h e t i m e o f h e ar i n g of t h e ap pe a l . ” 3. Br iefl y state d, t he assessee is whol l y ow ned s ubsi di ar y of Fulcr u m Tec hnol ogi es Inc ( Ful cr u m US). The assessee is eng age d i n provi ding i mpl e ment at io n and confi gur at ion ser vices of CA TS (Cell ul ar Asset Tracki ng S ys t e m) soft w ar e to i ts cl ient s i n India. 4. Duri ng the yea r under considerati on, t he assessee pr ovided such i mple ment at i on ser vices t o A ir tel. For t hi s purpose, the assessee avai led cer tain t ec hni cal ser vices support b y Ful cr u m US. The i nvoi ces a mount ing t o Rs. 4, 66, 27, 790/ - in ag gregat e were r ai sed b y Ful cru m US towar ds such ser vi ces r endere d t o assessee. In ter ms of pr ovi sions of Finance Act, 1994 deali ng wi t h servi ce t ax l aws, t he assessee was l iable t o deposi t servi ce tax a mount ing t o Rs.65, 27,8 91/- under r evers e char ge me cha nis m on i mport of suc h suppor t servi ces from Ful cru m US. T he assessee has pai d consi der at ion t o F ul cru m U S t owards tr ansact ion of pr ocure ment of ser vi ces and the servi ce t ax was dep osit ed b y t he assessee in addi t ion t o t he service f ees due t o Fulcr u m US. The assessee thus cl ai me d t he servi ce tax li abil it y under quest i on, whic h had ar i sen under r eve rse charge I.T.A. No.1280/Del/2020 3 me cha nis m o n i mport of ser vices by t he assessee, i s assessee’s ow n li abi l it y. Such a mount was never t o be r ec ei ved a nd rei mb ursed fr o m t he over seas ser vic e pro vider and the ref ore was not i ncl uded i n the P&L account . The l i abi l it ies t owards service tax were borne by A ssessee over and above t he pa yments f or seeking t echni cal ser vice. The servi ce tax li abi l ity was t hus rout ed t hrough t he bal ance- sheet and not ro ute d through t he P&L account as per acco unti ng pract ices. The Assessing Offi cer however made a dj ust me nt in t he ret ur n of i nc o me on account of service t ax l i abi li t y s hown as out st andi ng in t he bal ance-s heet. The ser vice ta x l iabi li t y was r epor ted as out st anding unde r Secti on 43B of t he Act i n t he Tax A udi t Re port as per requir e me nt of l aw. The Assessing Offi cer made disall owance towar ds unpai d ser vice t ax l iabi li t y based on suc h report ing. 5. The CI T(A ) c onfi r me d t he af or esai d act i on a nd hence t his app eal. 6. We ha ve caref ull y c onsi dere d t he ri val sub mi ssions. We fi nd t hat t he i ssue i s squarel y c over ed in fa vour of t he assessee b y t he j udg me nt of the H on’ble Del hi Hi gh C ourt i n t he case of CIT vs. Noble and Hewit t Pvt . Ltd., 30 5 IT R 3 24 (D el ) w herei n it was held t hat no disall owa nce of unpai d a mount of Ser vice Tax unde r Secti on 43B i s war rante d w hen t he assessee has not cl ai me d such Se rvi ce Tax a moun t as expe nses i n it s P&L account. This apa rt , the ser vi ce ta x l i abi li t y has ar isen under reverse char ge mechanis m a nd t here for e, al so t he act i on of the assessee is j ustif ied. Such ser vice tax l iabi li t y thus w il l not fal l wi t hin t he swee p of Sect ion 43B of t he Act in t he absenc e of I.T.A. No.1280/Del/2020 4 cor res pon ding r educti on of t axabl e i nco me. 7. We t hus fi nd meri t in the pl ea of the assessee. The acti on of t he CI T( A) is t hus set asi de and the Assessing Off icer is di rected t o rever se t he di sal l owa nce under Secti on 43B to t he ext ent of Rs.65, 27, 89 1/- as t he assessee has not disput ed Swachh B harat Cess amount ing t o R s.2,33,139/- . 8. I n t he resul t, t he appeal of t he assessee is allowed. Order pronounced in the open Court on 08/08/2023 Sd/- Sd/- [CHANDRA MOHAN GARG] [PRADIP KUMAR KEDIA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: /08/2023 Prabhat