Income Tax Officer, Ward-6(4), Hyderabad V. Preetham Engineering & Constructions, Hyderabad

ITA 1415/Hyd/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2489 (ITAT-HYDERABAD)
• Duration Of Justice: 6 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 13-02-2018
• Assessment Year: 2013-2014
• Appeal Filed On: 08-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MINI CHANDRAN
• Assessee Lawyers: V SRINIVAS
• Section: 43B; 143(3)

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SMT P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 1415/HYD/2017 ASSESSMENT YEAR: 2013-14 THE ITO, WARD -6(4), HYDERABAD. VS. M/S. PREETHAM ENGINEERING AND CONSTRUCTIONS, HYDERABAD. PAN- AAMFP0861A (APPELLANT) (RESPONDENT) REVENUE BY : SMT. MINI CHANDRAN ASSESSEE BY : SHRI V. SRINIVAS DATE OF HEARING : 13-02-2018 DATE OF PRONOUNCEMENT : 28-02-2018 ORDER PER P. MADHAVI DEVI, J.M.: THIS IS REVENUES APPEAL FOR THE A.Y 2013-14. IN THIS APPEAL, THE REVENUE IS AGGRIEVED BY THE ORDER OF THE CIT(A)-6, HYDERABAD DATED 08.05.2017, AND HAS RAISED THE FOLLOWING GROUNDS OF APPEAL. 1. THE LD. CIT(A) IS ERRONEOUS BOTH ON FACTS AND IN LAW. 2. THE LD. CIT(A) ERRED IN HOLDING THAT THE SERVICE TAX RECEIPT OF RS. 53,81,386/- DID NOT ACCRUE TO THE ASSESSEE IN THE ASSESSMENT YEAR 2013-14, INSPITE OF THE FACT THAT THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND HAS RAISED A BILL OF RS. 53,81,386/-/- ON L&T TOWARDS SERVICE TAX. 3. THE LD. CIT(A) ERRED IN HOLDING THAT THE ASSESSEE IS JUSTIFIED NOT RECOGNIZING THE SERVICE TAX AS RECEIPT TILL THE TIME THAT IT WAS REASONABLY CERTAIN OF THE RECEIPT. 4. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF HEARING. 2 ITA NO. 1415/HYD/2017 M/S PREETHAM ENGINEERING & CONSTRUCTIONS, HYDERABAD. 2. BRIEF FACTS OF THE CASE RELEVANT FOR ADJUDICATION OF THE GROUNDS OF APPEAR BEFORE US ARE THAT THE ASSESSEE IS CARRYING ON BUSINESS OF CIVIL CONTRACTOR AND ALSO SUPPLIES LABOUR TO L&T ON CONTRACT BASIS. IT FILED ITS RETURN OF INCOME FOR THE A.Y 2013-14 THROUGH E-FILING ON 31.03.2013 DECLARING AN INCOME OF RS. 2,75,310/-. DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT, THE A.O OBSERVED THAT THE ASSESSEE HAS SHOWN TURNOVER OF RS. 51,11,465/- ONLY IN THE RET URN OF INCOME, WHEREAS THE GROSS RECEIPTS AS PER THE 26AS IS RS. 10,08,42,397/-. ASSESSEE WAS ASKED TO EXPLAIN THE DISCREPANCY. ASSESSEE EXPLAINED THAT IT HAS RECEIVED INCOME FROM TWO CLIENTS I.E IT HAS RECEIVED INCOME FROM L & T FOR SUPPLYING FOR MAN POWER AND FROM M/S KBK CHEMICALS PVT LTD., FOR EXECUTING A CIVIL CONTRACT. ON PERUSAL OF INFORMATION FILED BY THE ASSESSEE, A.O OBSERVED THAT THE ASSESSEE HAS RAISED BILLS ON L&T INCLUDING THE SERVICE TAX BUT IT HAS NOT INCLUDED THE SERVICE TAX PORTION OF RS. 51,33,978/- IN THE GROSS RECEIPTS AND LIKEWISE IN THE RECEIPTS FROM M/S KBR CHEMICALS PVT LTD., ALSO THE SERVICE TAX AND THE WCT PAYABLE HAVE NOT BEEN INCLUDED IN THE GROSS RECEIPTS. THE A.O ASKED THE ASSESSEE TO EXPLAIN AS TO WHY 3 ITA NO. 1415/HYD/2017 M/S PREETHAM ENGINEERING & CONSTRUCTIONS, HYDERABAD. THE SAME IS NOT INCLUDED IN THE GROSS RECEIPTS IN THE PROFIT AND LOSS ACCOUNT. 3. THE ASSESSEE SUBMITTED THAT THE SERVICE TAX AND OTHER STATUTORY PAYMENTS WERE NOT CREDITED TO THE PROFIT AND LOSS ACCOUNT BUT WERE CREDITED TO THE RESPECTIVE LEDGER ACCOUNTS AND THAT THE EXPENDITURE WAS NOT CLAIMED IN PROFIT AND LOSS ACCOUNT. THE A.O, HOWEVER, DID NOT ACCEPT THE SAID CONTENTION. HE HELD THAT FOR THE PURPOSE OF DETERMINING THE INCOME UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION, THE TURNOVER WOULD INCLUDE ANY TAX, DUTY, CESS OR FEE U/S 145A OF THE IT ACT AND THEREAFTER, IS ALLOWABLE U/S 43B OF THE ACT IF THE SAME IS PAID DURING THE RELEVANT PREVIOUS YEAR OR BEFORE FILING OF THE RETURN OF INCOME. THEREFORE, OBSERVING THAT THE SERVICE TAX PAYABLE BY THE ASSESSEE AS ON 31.03.2013 IS RS. 53,81,386/-. THE A.O THEREFORE ADDED IT TO THE GROSS RECEIPTS AND SINCE THE ASSESSEE HAS FAILED TO PROVIDE ANY PROOF THAT IT HAS BEEN PAID THE SAME BEFORE FILING OF THE RETURN OF INCOME, HE DISALLOWED THE SAME U/S 43B OF THE IT ACT. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A), WHO ALLOWED THE SAME AND THE REVENUE IS IN APPEAL BEFORE US. 4 ITA NO. 1415/HYD/2017 M/S PREETHAM ENGINEERING & CONSTRUCTIONS, HYDERABAD. 4. THE LD. DR SUPPORTED THE ORDER OF THE A.O WHILE THE LD. COUNSEL FOR THE ASSESSEE RELIED UPON THE ORDER OF THE CIT(A). 5. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THE ASSESSEE HAS PROVIDED THE SERVICE OF SUPPLYING THE MANPOWER TO L&T AND EXECUTED THE CIVIL CONTRACT WORK FOR M/S KBK CHEMICALS PVT LTD., HAS RECEIVED THE SERVICE CHARGES AND CONTRACT RECEIPTS ALONG WITH THE SERVICE TAX. THE CIT(A) HAS OBSERVED THAT THE SERVICE TAX BECOMES PAYABLE ONLY WHEN THE VALUE OF TAXABLE SERVICES HAVE BEEN RECEIVED BY THE SERVICE PROVIDER, AND SINCE THE ASSESSEE HAS RECEIVED THE VALUE OF SERVICES RENDERED BY IT, SERVICE TAX HAD BECOME PAYABLE BY THE ASSESSEE DURING THE RELEVANT PREVIOUS YEAR AND THAT THE ACCRUAL AND RECEIPT OF THE SERVICE TAX COMPONENT OF THE TURNOVER HAPPENED SIMULTANEOUSLY. THE CIT(A) HAS ALSO TAKEN NOTE OF THE FACT THAT THE ASSESSEE HAS DISCHARGED THE SERVICE TAX OBLIGATION IMMEDIATELY AFTER RECEIPT OF THE SAME AND THAT THERE WAS NO DEFAULT IN PAYMENT OF SERVICE TAX AT THAT STAGE. WE HELD THAT, EVEN THOUGH THE ASSESSEE HAS NOT ROUTED THE SERVICE TAX THROUGH THE PROFIT AND LOSS ACCOUNT THE NET EFFECT IS NIL, SINCE IT HAD MADE THE PAYMENT IMMEDIATELY THEREAFTER AND 5 ITA NO. 1415/HYD/2017 M/S PREETHAM ENGINEERING & CONSTRUCTIONS, HYDERABAD. THEREFORE, THERE CANNOT BE ANY DISALLOWANCE U/S 43B OF THE ACT, PARTICULARLY SINCE THE ASSESSEE HAS NOT CLAIMED IT AS AN EXPENDITURE. THE LD. DR HAS NOT BEEN ABLE TO REBUT THESE FINDINGS OF THE CIT(A) WITH ANY EVIDENCE TO THE CONTRARY. THEREFORE, WE SEE NO MERIT IN THE APPEAL OF THE REVENUE. ACCORDINGLY THE APPEAL IS DISMISSED. 6. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 28 TH FEBRUARY, 2018. SD/- SD/- (S. RIFAUR RAHMAN) (P. MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 28 TH FEBRUARY, 2018 KRK 1 2 M/S PREETHAM ENGINEERING AND CONSTRUCTIONS, 8-3- 828&829, FLAT NO. 101, SNEHA RESIDENCY, SRINAGAR COLONY, HYDERABAD. THE ITO, WARD-6(4), HYDERABAD 3 THE COMMISSIONER OF INCOME TAX (A)-6, HYDERABAD. 4 5 THE PR. COMMISSIONER OF INCOME TAX-6, HYDERABAD. THE DR, ITAT HYDERABAD 6 GUARD FILE