RAJENDRA KUMAR SANCHETI, Jaipur V. ITO, Jaipur

ITA 284/JPR/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 5601 (ITAT-JAIPUR)
• Duration Of Justice: 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 29-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: POONAM RAI DCIT DR DHK
• Keywords: Business expenditure
• Section: 43B

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR JH HKKXPUN] YS[KK LNL; DS LE{K BEFORE: SHRI BHAGCHAND, ACCOUNTANT MEMBER VK;DJ VIHY LA-@ ITA NO. 284/JP/2016 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2010-11 SHRI RAJENDRA KUMAR SANCHETI 263-264, JOHRI BAZAR, JAIPUR CUKE VS. THE ITO WARD- 1(1), JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AGWPS 7304 K VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY: SHRI VIJAY GOYAL , CA JKTLO DH VKSJ LS@ REVENUE BY: SMT. POONAM RAI, DCIT- DR LQUOKBZ DH RKJH[K@ DATE OF HEARING : 06/02/2017 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 7 /02/2017 VKNS'K@ ORDER PER BHAGCHAND, AM THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORDE R OF THE LD. CIT(A) , ALIGARH (CAMP OFFICE AT JAIPUR) DATED 18-12-201 5 FOR THE ASSESSMENT YEAR 2010-11 RAISING FOLLOWING GROUNDS OF APPEAL. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 2,82,496/-[RS. 1,39,135+RS. 1,43,36 1] MADE BY THE AO BY APPLYING THE PROVISIONS OF SECTION 36( 1)(VA) OF I.T. ACT, 1961 IN RESPECT OF EMPLOYEES CONTRIBUTION OF PF WHICH WAS DEPOSITED BY THE ASSESSEE AFTER THE DUE D ATE BUT BEFORE FILING INCOME TAX RETURN OR WITHIN GRACE PER IOD ITA NO.284/JP/2016 SHRI RAJENDRA KUMAR SANCHETI VS. ITO, WARD- 1(1), J AIPUR 2 ALLOWED IN ASSESSEE'S PROPRIETARY FIRMS M/S. FOUR S EASON RESTAURANT AND M/S. FOUR SEASONS (INDIA) TOURS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT(A) ERRED IN CONFIRMING THE ADDIT ION OF RS. 8,15,126/- BY APPLYING THE PROVISIONS OF SECTION 43 B OF I.T. ACT, 1961 ON ACCOUNT OF SERVICE TAX OUTSTANDING ON 31-03- 2010 AND NOT PAID BEFORE DUE DATE OF FILING OF INCO ME TAX RETURN WITHOUT APPRECIATING THE FACT THAT THE SERVI CE TAX IS PAYABLE ON CASH AND SINCE THE SERVICE TAX WAS NOT R EALIZED FROM THE CUSTOMER SO IT WAS NOT PAYABLE BEFORE THE REALIZATION AND FURTHER THE AMOUNT OF SERVICE TAX W AS NOT DEBITED TO PROFIT AND LOSS ACCOUNT , HENCE NO DISAL LOWANCE CAN BE MADE. 2.1 APROPOS GROUND NO. 1 OF THE ASSESSEE, THE FACTS AS EMERGES FROM THE ORDER OF THE LD. CIT(A) IS AS UNDER:- 5.3 I HAVE OBSERVED THAT THE PROVIDENT FUND CONTRIBUTION COLLECTED BY THE EMPLOYER HAS BEEN PAI D BEYOND THE DUE DATE IN VIOLATION OF PROVISIONS OF SECTION 36(1)(VA). THEREFORE, HE HAS DISALLOWED SUCH EXPENDITURE AND M ADE AN ADDITION OF RS. 2,82,496/-. IN THIS REGARD, THE APP ELLANT HAS EXPLAINED THAT THE ENTIRE CONTRIBUTION WAS PAID BEF ORE THE DUE DATE OF FILING OF RETURN. FURTHER, IT HAS BEEN EXPL AINED THAT THE PAYMENT OF PF WAS MADE BY ACCOUNT PAYEE CHEQUE AND THE DELAY IS ON ACCOUNT OF NON-CLEARING OF CHEQUES WIT HIN THE DUE TIME ON ACCOUNT OF BANKING HOLIDAYS ETC. I HAVE CONSIDERED THE FACTS OF THE CASE AND THE APPELLANTS SUBMISSION. IN MY OPINION, THE PROVISIO NS OF SECTION 36(1) (VA) ARE VERY CLEAR AND DEDUCTION FOR PAYMENT OF EMPLOYEES CONTRIBUTION TO PF CAN BE ALLOWED WHE N SUCH SUM IS CREDITED TO THE EMPLOYEES ACCOUNT IN THE FUN D ON OR BEFORE DUE DATE. THE SAID CLAUSE DEFINES THE DUE DA TE AS THE DATE BY WHICH THE ASSESSEE IS REQUIRED AS AN EMPLOY ER TO CREDIT EMPLOYEES CONTRIBUTION TO THE EMPLOYEES AC COUNT IN ITA NO.284/JP/2016 SHRI RAJENDRA KUMAR SANCHETI VS. ITO, WARD- 1(1), J AIPUR 3 THE RELEVANT FUNDS UNDER ANY ACT/ RULE OR NOTIFICAT ION ISSUED THEREUNDER. THE ASSESSEE'S CONTENTION THAT HE HAS P AID THE EMPLOYEES CONTRIBUTION BEFORE THE DUE DATE FOR FIL ING THE RETURN IS MISPLACED AS THIS APPLIES ONLY TO PAYMENT OF EMPLOYERS CONTRIBUTION IN ACCORDANCE WITH THE PROV ISIONS OF SECTION 43B. IT MAY BE NOTED THAT THE PROVISIONS OF SECTION 43B ARE ONLY CONCERNED WITH EMPLOYERS CONTRIBUTION AND NOT EMPLOYEES CONTRIBUTION. THE EMPLOYEES CONTRIB UTION ARE GOVERNED BY ONLY PROVISIONS OF SECTION 36(1)(VA ) WHICH DO NOT PROVIDE FOR PAYMENT UPTO THE DATE OF FILING THE RETURN. THE DUE DATE DEFINED IN SECTION 36(1)(VA) IS NOT TH E DUE DATE FOR FILING OF RETURN BUT THE DUE DATE AS PER THE PR OVISIONS OF RULES RELATING TO THE FUND. FURTHER, IN THIS REGARD, BY CIRCULAR NO. 22/2015 DA TED 17-12-2015, THE CBDT HAS CLARIFIED THAT DEDUCTION I N RESPECT OF EMPLOYERS CONTRIBUTION TO PROVIDENT FUND ET. CA NNOT BE DISALLOWED IF THE SAME HAS BEEN PAID BEFORE THE DUE DATE FOR FILLING OF RETURN AND FURTHER CLARIFIED THAT THE SA ID CIRCULAR DOES NOT APPLY TO CLAIM OF DEDUCTION RELATING TO EM PLOYEES CONTRIBUTION TO WELFARE FUNDS WHICH ARE GOVERNED BY SECTION 36(1)(VA). IN VIEW OF THIS CIRCULAR, IT IS CLEAR TH AT PROVISIONS OF SECTION 43B ARE NOT RELEVANT FOR THE PURPOSE OF THE DEDUCTION U/S 36(1)(VA) WHICH IS AT A SEPARATE FOOT ING AND THE DEDUCTION CAN BE ALLOWED ONLY WHEN THE EMPLOYEES CONTRIBUTION HAS BEEN CREDITED ON OR BEFORE THE DUE DATE PRESCRIBED UNDER RELEVANT PROVIDENT FUND ACT/ RULES . HERE WE MUST NOTE THAT IF EMPLOYEES CONTRIBUTION I S ALLOWED TO BE PAID TILL FILING OF THE RETURN THEN T HE INTEREST OF THE EMPLOYEES WOULD BE ADVERSELY AFFECTED AS EMPLOY EES WOULD SUFFER LOSS OF INTEREST AND THE EMPLOYER WOUL D BE UNJUSTLY ENRICHED AS HE WOULD ENJOY THOSE FUNDS WIT HOUT INCURRING ANY COST. IN VIEW OF THE ABOVE, THE ADDITION OF RS. 2,82,496/ - ON ACCOUNT OF VIOLATION OF SECTION 36(1)(VA) IS CONFI RMED.) THIS GROUND OF APPEAL IS DISMISSED. ITA NO.284/JP/2016 SHRI RAJENDRA KUMAR SANCHETI VS. ITO, WARD- 1(1), J AIPUR 4 2.2 DURING THE COURSE OF HEARING, THE LD. AR OF THE ASSESSEE PRAYED FOR DELETION OF ADDITION OF RS. 2,82,496/- FOR WHICH TH E LD. AR OF THE ASSESSEE FILED THE FOLLOWING WRITTEN SUBMISSION. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE A SSESSEE SUBMITTED THE DETAIL OF DEPOSIT OF PF CONTRIBUTION OF EMPLOYE ES AND AS PER SUCH DETAIL THE ENTIRE CONTRIBUTION WAS PAID BEFORE THE DUE DATE OF FILING OF INCOME TAX RETURN. THE DUE DATE OF DEPOSIT OF PF IS 15 DAYS FROM DATE OF PAYMENT OF WAGES ETC. WHICH IN ASSESSEES CASE IS 7TH DAY OF THE MONTH FO LLOWING IMMEDIATE PREVIOUS MONTH I.E. WAGES OF MARCH ARE PAID BY 7TH APRIL AND SO ON. AS SUCH THE DUE DATE OF PAYMENT OF PF & ESI WAS DUE ON 21ST OF THE MONTH I.E. MARCH DUES ARE PAYABLE BY 21ST APRIL AND SO ON. IN THIS REGARD IT IS SUBMITTED THAT THE PAYMENT OF PF WAS MADE BY THE ASSESSEE BY A/C PAYEE CHEQUE AND THE DELAY IS ON ACCOUNT OF NON CLEARING OF CHEQUES BY 1 OR 2, BANK HOLIDAYS ETC. THE ASSESSEE IS DILIGENT IN DEPOSITING THE PAYMENTS BY 15TH OF E ACH MONTH HOWEVER ON ACCOUNT OF HOLIDAY/NON-BANKING DAY ETC. THE DATE SO METIMES EXCEEDS 15TH OF THE MONTH. THE ASSESSEE HAS ALWAYS PAID THE AMOUNT DEDUCTED BEFORE DUE DATE I.E. 21ST OF THE MONTH. SINCE THE AMOUNT HAS BEEN P AID BEFORE FILING OF RETURN OF INCOME AND HENCE NOTHING SHOULD BE DISALLOWED. W E RELY ON THE FOLLOWING DECISIONS OF HONBLE RAJASTHAN HIGH COURT:- (I) M/S CENTRAL OFFICE MEWAR PALACE ORGANIZATION PV T. LTD VS THE JOINT COMMISSIONER OF INCOME-TAX, RANGE-2 UDAIP UR AND M/S CENTRAL OFFICE MEWAR PALACE ORGANIZATION PVT. L TD. VERSUS THE ASSISTANT COMMISSIONER OF INCOME TAX ITA NO 55,54/2009 ORDER DATED 05/01/2017 REPORTED IN 2017 (1) TMI 677 (COPY ENCLOSED) (II) COMMISSIONER OF INCOME TAX, UDAIPUR VERSUS M/S . UDAIPUR DUGDH UTPADAK SAHAKARI SANGH LIMITED, UDAIPUR : [20 14] 366 ITR 163 (RAJ) (III) COMMISSIONER OF INCOME TAX VERSUS M/S. STATE BANK OF BIKANER & JAIPUR AND JAIPUR VIDYUT VITARAN NIGAM LT D. [2014] 363 ITR 70 (RAJ) 2) THE HONBLE ITAT JAIPUR BENCH IN THE CASE OF ACI T CIRCLE-6, JAIPUR VS KANHAIYA LAL KALYANMAL ITA NO 135, 760 & 136/JP/2013 VIDE ORDER DATED 26/01/2014 HAS HELD AS UNDER:- ITA NO.284/JP/2016 SHRI RAJENDRA KUMAR SANCHETI VS. ITO, WARD- 1(1), J AIPUR 5 4. HOWEVER, THIS ADDITION HAS BEEN DELETED BY LD. C IT(A) BY FOLLOWING THE SETTLED POSITION OF LAW ON THIS ISSUE . IT IS A SETTLED POSITION OF LAW THAT EVEN IF THE EMPLOYEES CONTRIBU TION IS PAID BELATEDLY, BUT BEFORE THE DUE DATE OF FILING OF THE RETURN, IT CANNOT BE DISALLOWED UNDER SECTION 36(1)(VA) OF THE ACT. ADMITTEDLY, THE PAYMENTS WERE MADE BEFORE FILING OF RETURN OF INCOME IN ALL THE YEARS. LD. CIT(A) HAS RELIED ON T HE TRIBUNALS ORDER RENDERED IN THE CASE OF THIS ASSESSEE FOR A.Y . 2005-06. A COPY OF THIS ORDER IS ALSO AVAILABLE IN THE ASSESSE ES PAPER BOOK. 5. BEFORE US BOTH THE PARTIES HAVE REITERATED THEIR EARLIER ARGUMENTS. THE LD. D.R. DID NOT DENY THE FACT THAT THIS ISSUE STANDS COVERED IN THE FAVOUR OF THE ASSESSEE BY THE T.O. IN ASSESSEES OWN CASE FOR A.Y. 2005- 06, BUT HE HAS J USTIFIED THE ACTION OF THE ASSESSING OFFICER. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE ARE SATISFIED THAT THE LAW ON THE IS SUE STANDS SETTLED THAT IN CASE ASSESSEE DEPOSITS PF/ESI EMPLO YEES CONTRIBUTION BEFORE THE DUE DATE OF FILING OF RETUR N, IT CANNOT BE DISALLOWED UNDER SECTION 36(1)(VA) OF THE ACT. WE H AVE GONE THROUGH THE DECISION OF THE TRIBUNAL INTER-ALIA, TH EREFORE, BY RESPECTFULLY FOLLOWING THE SAME SPECIFICALLY THE TR IBUNALS ORDER IN ASSESSEES OWN CASE, FOR A.Y. 2005-06 DATE D 13/01/2011, WE CONFIRM THE IMPUGNED DELETION AND CA NNOT ALLOW GROUND NO. (I) OF THE REVENUES APPEAL. FACTS OF THE ABOVE CITED CASES ARE SIMILAR TO THE F ACTS OF THE ASSESSEES CASE. IN THIS CASE ALSO ISSUE IS FOR THE LATE PAYME NT OF EMPLOYEES CONTRIBUTION OF PF. IN VIEW OF THE ABOVE SUBMISSION THE ORDER OF LD CIT (A) SHOULD BE SET ASIDE AND THE ADDITION MADE BY LD. AO IS UNJ USTIFIABLE AND DESERVES TO BE DELETED. 2.3 THE LD. DR RELIED ON THE ORDERS OF THE AUTHORIT IES BELOW. 2.4 I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS NOTED FROM THE RECORDS T HAT SIMILAR ISSUE HAS BEEN DECIDED BY ITAT JAIPUR BENCH IN THE CASE OF AC IT VS. KANHAIYA ITA NO.284/JP/2016 SHRI RAJENDRA KUMAR SANCHETI VS. ITO, WARD- 1(1), J AIPUR 6 LAL KALYANMAL (ITA NO. 135, 760 & 136/JP/2013 ORDER DATED 26-01- 2014. RESPECTFULLY FOLLOWING THE DECISION OF ITAT J AIPUR BENCH IN THE CASE OF ACIT VS. KANHAIYA LAL KALYANMA (SUPRA) AND ALSO THE CASE LAWS MENTIONED ABOVE, THE ISSUE IN QUESTION IS DECIDED I N FAVOUR OF THE ASSESSEE BEING THE SIMILAR FACTS AND CIRCUMSTANCES OF THE CASE. THUS GROUND NO. 1 OF THE ASSESSEE IS ALLOWED 3.1 APROPOS GROUND NO. 2 OF THE ASSESSEE, THE FA CTS AS EMERGES FROM THE ORDER OF THE LD. CIT(A) IS AS UNDER:- 5.6 THE AO OBSERVED THAT THE APPELLANT HAS SHOWN LIABILITY TO DEPOSIT THE SERVICE TAX OF RS. 8,15,12 6/- AND IN THIS REGARD, THE APPELLANT HAS EXPLAINED THAT THE S ERVICE TAX WAS OUTSTANDING AS ON 31-03-2010 AS THE SAME WAS NO T REALIZED. THIS TAX WAS NOT DEPOSITED BEFORE FILING OF THE RETURN. THE APPELLANTS CONTENTION WAS THAT SERVICE TAX IS CHARGED FROM THE PARTY ON THE BILL ISSUED AND THE S AME IS REQUIRED TO BE DEPOSITED WHEN IT IS COLLECTED FROM THE PARTY. IT HAS BEEN CLAIMED THAT SERVICE TAX WAS NOT COLLEC TED FROM THE PARTIES UPTO THE DATE OF FILING OF RETURN. FURT HER, THE APPELLANT HAS SUBMITTED THAT AS PER RULE 6(1) OF TH E SERVICE TAX, THE SERVICE TAX RULES IS REQUIRED TO BE DEPOSI TED WHEN THE SAME IS COLLECTED FROM THE PARTIES. I HAVE CONSIDERED THE APPELLANTS SUBMISSION. FIRST OF ALL, WE HAVE TO CONSIDER THE PRINCIPLES OF ACCOUNTI NG IN ORDER TO ARRIVE AT THE CORRECT FACTUAL POSITION. AS PER E STABLISHED NORMS OF ACCOUNTING, EVERY ITEM OF REVENUE NATURE H AS TO BE CREDITED IN THE P/L ACCOUNT ON ACCRUAL BASIS.WHEN A BILL IS RAISED ON A PARTY IT INCLUDES BOTH THE SERVICE CHAR GES AS WELL AS THE CHARGEABLE TAXES. THUS, BOTH THE SERVICE AMO UNT AS WELL AS THE SERVICE TAX AMOUNT SHOULD BE NECESSARIL Y CREDITED ITA NO.284/JP/2016 SHRI RAJENDRA KUMAR SANCHETI VS. ITO, WARD- 1(1), J AIPUR 7 IN THE P/L ACCOUNT. IT IS SEEN THAT IN THAT IN THIS CASE, THE SERVICE TAX OF RS. 8,15,126/- HAS NOT BEEN CREDITED IN THE P/L ACCOUNT WHICH IS AGAINST THE ACCOUNTING PRINCIPLES. ACCORDINGLY, THE SERVICE TAX AMOUNT SHOULD BE ADDED ON THE RECEIPT SIDE IN THE P/L ACCOUNT. THIS WILL INCREASE THE CREDIT SIDE BY RS. 8,15,126/-. FURTHER, AS PER SECTION 43B , ANY SUM PAYABLE BY WAY OF TAXES OR FEES ETC. SHALL BE ALLOW ED IN THE PREVIOUS YEAR IN WHICH SUM IS ACTUALLY PAID. ADMITT EDLY, THIS SERVICE TAX OF RS. 8,15,126/- HAS NOT BEEN PAID DUR ING THE RELEVANT YEAR. THEREFORE, THE DEDUCTION OF RS. 8,15 ,126/- IS NOT ALLOWABLE IN THIS YEAR. IN VIEW OF THE AFORESAID DISCUSSION, THE CREDIT SID E WOULD GET INCREASE BY RS. 8,15,126/- BUT DEBIT SIDE NOT INCREASE BY EQUIVALENT AMOUNT. THE NET RESULT IS TH AT INCOME WOULD INCREASE BY RS. 8,15,126/-. 3.2 DURING THE COURSE OF HEARING, THE LD. AR OF THE ASSESSEE PRAYED FOR DELETION OF ADDITION OF RS. 8,15,126/- FOR WHICH TH E LD. AR OF THE ASSESSEE FILED THE FOLLOWING WRITTEN SUBMISSION. 1.SERVICE-TAX NOT REALIZED FROM CUSTOMERS HENCE W AS NOT PAYABLE AS PER LAW . THE SERVICE TAX OF RS. 8,15,126/- WAS OUTSTANDING AS ON 31.03.20010 AND THE SAME WAS NOT REALIZED TO ASSESSEE, THEREFORE THE SA ME WAS NOT DEPOSITED BEFORE FILING OF THE RETURN. IT IS PERTINENT TO MENTION HE RE THAT AS PER PROVISION OF SERVICE TAX THE SERVICE TAX IS CHARGED FROM THE PAR TY ON THE BILL OF SERVICE ISSUED TO PARTY BUT THE SAME IS REQUIRED TO BE DEPO SITED WHEN THE SAME IS COLLECTED FROM PARTY AS PER PROVISIONS OF RULE 6(1) OF SERVICE TAX RULES. IN THE CASE OF THE ASSESSEE SERVICE TAX AMOUNTING TO R S. 8,15,126/- WAS NOT COLLECTED UP TO THE DATE OF FILING OF THE RETURN. T HE ASSESSEE MAINTAINS BOOKS OF ACCOUNTS ON ACCRUAL BASIS. THEREFORE, THE SERVICE T AX PAYABLE ACCOUNT SHOWS THE TAX PAYABLE ON THE GROSS AMOUNT BILLED AND NOT THE AMOUNT PAYABLE AS PER THE AMOUNT RECEIVED BY THE ASSESSEE. THE ASSESSEE H AS PAID THE SERVICE TAX ON AMOUNTS REALIZED HENCE NO DISALLOWANCE WAS WARRANTE D. RELIANCE IS PLACED ON THE FOLLOWING JUDGMENTS- ITA NO.284/JP/2016 SHRI RAJENDRA KUMAR SANCHETI VS. ITO, WARD- 1(1), J AIPUR 8 (A) MUMBAI HIGH COURT IN THE CASE OF COMMISSIONER O F INCOME TAX VS. OVIRA LOGISTICS PVT. LTD. (2015) 377 ITR 0129 (BOM ) : HELD THAT:- SECTION 43B DOES NOT CONTEMPLATE LIABIL ITY TO PAY THE SERVICE TAX BEFORE ACTUAL RECEIPT OF THE FUNDS IN T HE ACCOUNT OF THE ASSESEE. LIABILITY TO PAY SERVICE TAX INTO THE TREA SURY WILL ARISE ONLY UPON THE ASSESSEE RECEIVING THE FUNDS AND NOT OTHER WISE. ACCORDINGLY, WHEN SERVICES ARE RENDERED, THE LIABILITY TO PAY TH E SERVICE TAX IN RESPECT OF THE CONSIDERATION PAYABLE WILL ARISE ONL Y UPON THE RECEIPT OF SUCH CONSIDERATION AND NOT OTHERWISE. (PARA 9). (B) ITAT MUMBAI IN THE CASE OF IND GLOBAL CORPORATE FINANCE P. LTD. VS. INCOME TAX OFFICER (2012) 19 ITR (TRIB) 483 (MUMBA I) HELD THAT IF THE PAYMENT FOR SERVICE RENDERED IS NO T REALIZED, THERE IS NO LIABILITY AS TO PAYMENT OF SERVICE TAX AND ONCE THE RE WAS NO LIABILITY FOR PAYMENT OF SERVICE TAX, THE PROVISION OF S. 43B ARE NOT APPLICABLE. 2. SERVICE TAX WAS NOT CLAIMED AS DEDUCTION IN PROF IT AND LOSS A/C:- FURTHER THE PROVISION OF SECTION 43B ARE NOT APPLIC ABLE IN RESPECT OF SERVICE TAX CHARGED FROM THE CUSTOMERS BECAUSE THE SECTION 43B IS IN RESPECT TO ALLOWANCE /DEDUCTION ALLOWABLE IN RESPECT OF TAX, DUTY, CESS OR FEES AS EXPENSES. THE SERVICE TAX WAS NOT DEBITED TO P& L A /C HENCE NOT CLAIMED AS DEDUCTION FROM INCOME BUT THE SAME IS KEPT IN SEPAR ATE ACCOUNT AS LIABILITY. SINCE NO DEDUCTION OF THIS AMOUNT CLAIMED BY THE AS SESSEE FROM INCOME, THEREFORE, NO DISALLOWANCE CAN BE MADE ON THIS ACCO UNT. IN VIEW OF THE ABOVE SUBMISSION, THE ADDITION MADE BY THE LD. A.O. IS BA SELESS AND UNJUSTIFIABLE AND BAD IN LAW DESERVES TO BE DELETED. RELIANCE IS PLACED ON THE FOLLOWING DECISIONS:- A) DELHI HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. NOBLE & HEWITT (INDIA) (P) LTD. (2008) 305 ITR 032 4 : (2008) HONBLE DELHI HIGH COURT HELD THAT ASSESSEE FOLLOW ING MERCANTILE SYSTEM OF ACCOUNTING NOT PAYING TO GOVERNMENT PART OF SERVICE TAX COLLECTED BY IT NOT DEBITING THE SAME TO ITS P&L A/ C AS AN EXPENDITURE NOR CLAIMING ANY DEDUCTION IN RESPECT OF THE SAID A MOUNT, THE QUESTION OF DISALLOWING THE SAME UNDER S. 43B DOES NOT ARISE . (B) ITAT CHENNAI IN THE CASE OF REAL IMAGE MEDIA T ECHNOLOGIES PVT. LTD. VS. ACIT (ITAT CHENNAI) 306 ITR(AT) 106 HELD THE RIGOUR OF SEC.43B MAY BE APPLICABLE IN THE CASE OF SALES- TAX OR EXCISE DUTY BUT THE SAME CANNOT BE SAID TO B E THE POSITION IN ITA NO.284/JP/2016 SHRI RAJENDRA KUMAR SANCHETI VS. ITO, WARD- 1(1), J AIPUR 9 CASE OF SERVICE-TAX BECAUSE OF TWO REASONS. FIRSTLY , THE ASSESSEE IS NEVER ALLOWED DEDUCTION ON ACCOUNT OF SERVICE TAX W HICH IS COLLECTED ON BEHALF OF THE GOVT., AND PAID TO THE GOVT. ACCOR DINGLY. THEREFORE, A SERVICE PROVIDER IS MERELY ACTING AS AN AGENT OF TH E GOVT., AND IS NOT ENTITLED TO CLAIM DEDUCTION ON ACCOUNT OF SERVICE T AX. HENCE, ON THIS ACCOUNT ALONE ADDITION UNDER SEC.43B COULD NOT BE M ADE AND THE SAME HAS BEEN CORRECTLY DELETED BY THE CIT(APPEALS). IF THERE IS NO LIABILITY TO MAKE THE PAYMENT TO THE CREDIT OF CENTRAL GOVERN MENT BECAUSE OF NON RECEIPT OF PAYMENTS FROM THE RECEIVER OF THE SE RVICES, THEN IT CANNOT BE SAID THAT SUCH SERVICE TAX HAS BECOME PAY ABLE IN TERMS OF CLAUSE (A) OF SEC.43B BECAUSE THAT CLAUSE SPECIFICA LLY MENTIONS SUM PAYABLE BY THE ASSESSEE. SINCE SERVICE TAX WAS NOT PAYABLE BY THE ASSESSEE, THE RIGOUR OF SEC.43B COULD NOT HAVE BEEN APPLIED TO THE CASE OF THE ASSESSEE. 3. SERVICE TAX OUGHT TO SHOWN IN PROFIT AND LOSS AC COUNT AS INCOME. THE ASSESSEE FOLLOWS THE MERCANTILE SYSTEM OF ACCO UNTING. THE ASSESSEE IS COLLECTING THE SERVICE TAX ON BEHALF OF THE GOVERNM ENT AND ACTING HERE AS AN AGENT OF THE GOVERNMENT. THUS, THE SERVICE TAX IS L IABILITY OF THE ASSESSEE AND IT HAS BEEN CORRECTLY SHOWN IN BALANCE SHEET. WHEN THE PAYMENT OF SERVICE TAX IS MADE THE DEBIT IS MADE TO SERVICE TAX LIABILITY. IF THE SERVICE TAX IS CREDITED IN P & L A/C THAN PAYMENT OF THE SERVICE TAX WILL B E SHOWN AS AN EXPENDITURE. IN SUCH SITUATION THE INCOME MAY BE FOR ONE FINANCI AL YEAR AND THE EXPENSES AGAINST THIS INCOME (PAYMENT OF SERVICE TAX) MAY BE IN ANOTHER YEAR WHICH WILL BE AGAINST THE PRINCIPLE OF MATCHING. RELIANCE IS P LACED ON FOLLOWING DECISION:- (A) PHARMA SEARCH V. ACIT (2012) 53 SOT 1 (MUM.) ( TRIB.) BUSINESS EXPENDITUREDEDUCTION ON ACTUAL PAYMENT ASSESSEE IN ITS P&L SHOWED CERTAIN RECEIPTS FOR REN DERING CONSULTANCY SERVICES AFTER DEDUCTING SERVICE TAX TH ERE FROM THOUGH THE SERVICE TAX WAS INCLUDED IN THE INVOICE RAISED BY THE ASSESSEE ON THE PERSON FROM WHOM SERVICE CHARGES WE RE RECEIVABLE, HOWEVER, SUCH SUM WAS NOT RECEIVED TILL THE END OF THE FINANCIAL YEAR 2006-07AO WAS OF THE VIEW THAT THIS SUM RECEIVABLE BY THE ASSESSEE OUGHT ALSO TO HAVE BEEN SHOWN AS RECEIPTS IN THE PROFIT AND LOSS ACCOUNT AND FURTHER UNDER THE PROVISIONS OF SECTION 43B OF THE ACT THE ASSESSEE O UGHT TO HAVE MADE PAYMENT OF THE SERVICE TAX TO THE GOVERNMENT B ECAUSE THE BILLS WERE RAISED ON THE CUSTOMERS BY THE ASSESSEE IN THE MONTH OF FEBRUARY AND MARCH AND THAT SECTION 43B OF THE A CT WILL BE APPLICABLEAO ALSO MADE A REFERENCE TO PROVISIONS O F SECTION 145A OF THE ACT WHICH SAYS THAT ALL RECEIPTS SHOULD BE ACCOUNTED ON INCLUSIVE BASIS AND, THEREFORE, MADE A N ADDITION OF ITA NO.284/JP/2016 SHRI RAJENDRA KUMAR SANCHETI VS. ITO, WARD- 1(1), J AIPUR 10 SERVICE TAX AMOUNT TO THE TOTAL INCOME OF THE ASSES SEEHELD, THE RIGOR OF SECTION 43B MIGHT BE APPLICABLE TO THE 'CASE OF SALES-TAX OR EXCISE DUTY BUT THE SAME COULD NOT BE SAID TO BE THE POSITION IN CASE OF SERVICE-TAX BECAUSE OF TWO REAS ONSFIRSTLY, THE ASSESSEE IS NEVER ALLOWED DEDUCTION ON ACCOUNT OF SERVICE TAX WHICH IS COLLECTED ON BEHALF OF THE GOVERNMENT AND IS PAID TO THE GOVERNMENT ACCOUNT, ACCORDINGLYTHEREFORE, A SERVICE PROVIDER IS MERELY ACTING AS AN AGENT OF THE GOVERN MENT, AND IS NOT ENTITLED TO C/AIM DEDUCTION ON ACCOUNT OF SERVI CE TAX HENCE, ON THIS ACCOUNT ALONE ADDITION UNDER SECTION 43B COULD NOT HAVE BEEN MADE, AND THE SAME HAD BEEN CORRECTLY DELETED BY THE COMMISSIONER (APPEALS)SECONDLY, SECTION 43B(A) USES THE EXPRESS ON 'ANY SUM PAYABLE'FOR MAKING ANY DISALLOWANCE, FIRST OF ALL IT HAS TO BE ESTABLISHED THAT SUCH SUM IS PAYABLESINCE SERVICE TAX WAS NOT PAYABLE BY THE AS SESSEE, THE RIGOR OF SECTION 43B OF THE ACT COULD NOT BE APPLIE D TO ITS CASEPROVISIONS OF SEC.43B CANNOT BE INVOKED UNLESS THE ASSESSEE HAS CLAIMED BY WAY DEDUCTION THE AMOUNTS S PECIFIED U/S 43B WITHOUT MAKING ACTUAL PAYMENT (4) THE SIMILAR ADDITION WAS DELETED BY HONBLE ITA T JAIPUR BENCH IN THE CASE OF SISTER CONCERN OF THE ASSESSEE M/S FOUR SEA SONS (INDIA) TOURS IN ITA NO 570/JP/2013 VIDE ORDER DATED 12.02.2016. THE CO PY OF ORDER IS ENCLOSED HEREWITH. THE RELEVANT PART OF THE DECISION IS AS UNDER:- 3.2. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED THE RECORD. IN THE PRESENT CASE, SINCE SERVICE TAX WAS NOT PAYABLE BY THE ASSESSEE, THE RIGOR OF SECTION 43B OF THE ACT COULD NOT BE APPLIED TO ITS CASE. APART FROM THE ABOVE, WE FIND THE DELHI HIGH COURT IN THE CASE OF CIT V. NOBLE AND HEWITT (I) (P.) LTD. [2008] 305 ITR 324/ 166 TAXMAN 48 (DELHI) HAS ON IDENTICAL ISSUE TAKEN THE VIEW THAT PROVISIONS OF SEC.43B CANNOT BE INVOK ED UNLESS THE ASSESSEE HAS CLAIMED BY WAY DEDUCTION THE AMOUNTS SPECIFIED U/S. 43B WITHOUT MAKING ACTUAL PAYMENT. THE FOLLOWING WERE THE RELEVANT OBS ERVATIONS OF THE COURT IN THIS REGARD: '5. LEARNED COUNSEL FOR THE REVENUE URGES THAT THE DECISION OF THE CALCUTTA HIGH COURT IN CHOWRINGHEE SALES BUREAU P. LTD. [1977] 110 ITR 385, COVERS THE POINT IN ITS FAVOUR. WE ARE UNABLE TO AGREE. IN THAT CASE, IT WAS HELD THAT THE LIABILITY TO PAY SALES TAX AROSE THE MOMENT A SALE OR PURCHASE WAS EFFECTED AND IF AN AS SESSEE WAS MAINTAINING ACCOUNTS ON THE MERCANTILE SYSTEM IT WO ULD BE ENTITLED TO DEDUCTION OF THE ESTIMATED LIABILITY OF SALES TAX, EVEN THOUGH SUCH SALES TAX HAD NOT BEEN PAID TO THE SALES TAX AUTHOR ITIES. THE QUESTION THERE CONCERNED WAS THE ENTITLEMENT OF THE ASSESSEE TO DEDUCTION UNDER SECTION 10(1) AND 10(2)(XV) OF THE INDIAN INC OME TAX ACT, ITA NO.284/JP/2016 SHRI RAJENDRA KUMAR SANCHETI VS. ITO, WARD- 1(1), J AIPUR 11 1922. THE DECISION IS CLEARLY DISTINGUISHABLE IN IT S APPLICATION TO THE PRESENT CASE. HERE WE ARE CONCERNED WITH AN ASSESSE E WHO HAS NOT EVEN CLAIMED ANY DEDUCTION ON THE GROUND OF SERVICE TAX AND HAS NOT DEBITED THE AMOUNT TO ITS PROFIT AND LOSS ACCOUNT. MOREOVER, THE PROVISIONS OF SECTION 43B OF THE ACT ARE QUITE CLEA R IN THIS REGARD. THE DECISION OF THE CALCUTTA HIGH COURT IN CHOWRING HEE SALES BUREAU P. LTD'S CASE [1977] 110 ITR 385 WAS NOT IN THE CONTEXT OF THE APPLICABILITY OF SECTION 43B OF THE ACT. 6. IN OUR OPINION, SINCE THE ASSESSEE DID NOT DEBIT THE AMOUNT TO THE PROFIT AND LOSS ACCOUNT AS AN EXPENDITURE NOR DID T HE ASSESSEE CLAIM ANY DEDUCTION IN RESPECT OF THE AMOUNT AND CONSIDER ING THAT THE ASSESSEE IS FOLLOWING THE MERCANTILE SYSTEM OF ACCO UNTING, THE QUESTION OF DISALLOWING THE DEDUCTION NOT CLAIMED W OULD NOT ARISE. 7. LEARNED COUNSEL FOR THE REVENUE SUBMITS THAT THE ASSESSEE HAS SOUGHT TO EVADE TAX UNDER THE MERCANTILE SYSTEM OF ACCOUNTING. WE ARE OF THE VIEW THAT IT IS NOT FOR THE REVENUE AUTH ORITIES TO TELL THE ASSESSEE HOW TO MAINTAIN ITS ACCOUNTS.' FURTHER AS FAR AS SERVICE TAX IS CONCERNED, AS PER THE LAW PREVAILING DURING THE PREVIOUS YEAR, THE LIABILITY TO PAY THE SAME AR ISES ONLY ON RECEIPT BY THE ASSESSEE. SINCE THE LIABILITY TO PAY SERVICE TAX DO ES NOT EXIST IN THE PRESENT CASE, THE SERVICE TAX CANNOT BE SAID TO BE 'PAYABLE ' AND THEREFORE PROVISIONS OF SEC.43-B OF THE ACT COULD NOT ALSO BE INVOKED. 3.3. THEREFORE, WE HAVE NO HESITATION TO SET ASIDE THE ORDER PASSED BY THE AUTHORITIES BELOW. ACCORDINGLY, THE APPEAL OF THE A SSESSEE IS ALLOWED. 3.3 THE LD. DR RELIED ON THE ORDERS OF THE AUTHORIT IES BELOW. 3.4 I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS NOTED FROM THE RECORDS T HAT SIMILAR ISSUE HAS BEEN DECIDED BY ITAT JAIPUR BENCH IN FAVOUR OF THE SISTER CONCERN OF THE ASSESSEE M/S. FOUR SEASONS (INDIA) TOURS VS. DCIT ( ITA NO. 570/JP/2013 VIDE ORDER DATED 12-02-2016). RESPECTFU LLY FOLLOWING THE DECISION OF ITAT JAIPUR BENCH IN THE CASE OF M/S. F OUR SEASONS (INDIA) ITA NO.284/JP/2016 SHRI RAJENDRA KUMAR SANCHETI VS. ITO, WARD- 1(1), J AIPUR 12 TOURS VS. DCIT,CIRCLE- 6, JAIPUR (SUPRA) AND ALSO T HE CASE LAWS MENTIONED ABOVE, THE ISSUE IN QUESTION IS DECIDED IN FAVOUR O F THE ASSESSEE BEING THE SIMILAR FACTS AND CIRCUMSTANCES OF THE CASE. THUS G ROUND NO. 2 OF THE ASSESSEE IS ALLOWED 4.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED ORDER PRONOUNCED IN THE OPEN COURT ON 07 /02 /2017. SD/- HKKXPUN ( BHAGCHAND) YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 07/02/ 2017 *MISHRA VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI RAJENDRA KUMAR SANCHETI, JAIP UR 2. IZR;FKHZ@ THE RESPONDENT- THE ITO, WARD- 1(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. 284/JP/2016) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ @ ASSISTANT. REGISTRAR