ACIT, New Delhi V. M/s. Biotech Consortium India Ltd., New Delhi

ITA 2841/DEL/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65265 (ITAT-DELHI)
• Duration Of Justice: 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-08-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 08-08-2012
• Assessment Year: 2009-2010
• Appeal Filed On: 08-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 43B; 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A NEW DELHI BEFORE SHRI R.K. GUPTA AND SHRI A.N. PAHUJA ITA NO. 2841/DEL/12 A.YR. 2009-10 ACIT, CIR. 3(1), VS. M/S BIOTECH CONSORTIUM INDI A LTD., NEW DELHI. 5 TH FLOOR ANURAT BHAWAN, 210, DEEN DAYAL UPADHYAYA MARG, NEW DELHI. PAN/ GIR NO. AAACB1113A ( APPELLANT ) ( RESPONDENT ) APPELLANT BY : SHRI NEERAJ KUMAR SR. DR RESPONDENT BY : SHRI MUKESH GUPTA AR O R D E R PER R.K. GUPTA, J.M: : THIS IS REVENUES APPEAL AGAINST CIT(A)S ORDER DA TED 1-3-2012 RELATING TO ASSESSMENT YEAR 2009-10. 2. THE DEPARTMENTAL APPEAL IS AGAINST DELETION OF: (I) DISALLOWANCE OF RS. 4,71,284/- MADE U/S 40A(3); AND (II) DISALLOWANCE OF RS. 41,59,667/- MADE U/S 43B. 3. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF CONSULTANCY AND PROJECT WORK. THE COMPANY IS PROMOTED BY THE DEPART MENT OF BIOTECHNOLOGY, MINISTRY OF SCIENCE AND TECHNOLOGY, GOVT. OF INDIA AND FINANCED BY THE ALL INDIA FINANCIAL INSTITUTIONS. T HE COMPANY PROVIDES ASSISTANCE IN EXECUTION OF VARIOUS PROJECTS OF DEPA RTMENT OF BIOTECHNOLOGY, MINISTRY OF SCIENCE AND TECHNOLOGY; AND MINISTRY OF ENVIRONMENT AND FORESTS & OTHER GOVT. DEPARTMENTS. THE ASSESSING OF FICER MADE A 2 DISALLOWANCE OF RS. 4,71,282/- U/S 40A(3) OF THE I. T. ACT AND MADE ANOTHER ADDITION ON ACCOUNT OF UNPAID SERVICE TAX U/S 43B O F RS. 41,59,667/-. 4. IN RESPECT OF FIRST ADDITION IT WAS SUBMITTED BE FORE CIT(A) THAT ASSESSEE COMPANY HAS TO ORGANIZE MEETING OF VARIOUS COMMODITIES FORMED BY DIFFERENT GOVT. DEPARTMENTS OR ORGANIZE WORKSHOP S ACROSS THE COUNTRY. IN SUCH MEETINGS/ WORKSHOPS, THE COMPANY REIMBURSES TR AVEL EXPENSES, LOCAL CONVEYANCE EXPENSES, BOARDING & LODGING EXPENSES OF PARTICIPANTS. THE REIMBURSEMENT IS PARTLY MADE IN CASH AND PARTLY BY CHEQUES. IT WAS FURTHER SUBMITTED THAT CASH ADVANCES HANDED OVER TO THE STA FF FOR ORGANIZING MEETING/ WORKSHOPS AND FOR ACCOUNTING PURPOSES, TH E CASH IS RECORDED IN THE NAME OF STAFF AT THE TIME STAFF SUBMITS THE DETAILS OF EXPENSES. IT WAS SUBMITTED THAT ALL THESE DETAILS WERE FILED BEFORE THE ASSESSING OFFICER . IT WAS FURTHER SUBMITTED THAT COMPANY BOOKS TOTAL EXPE NSES I.E. PAYMENTS MADE TO VARIOUS PARTICIPANTS BY PASSING A SINGLY EN TRY. HOWEVER, TOTAL CASH PAYMENT DOES NOT EXCEED RS. 20,000/- MADE TO A SING LE PERSON. SAMPLE COPIES OF SINGLE ENTRIES PASSED IN WHICH CASH PAYME NTS REFLECTED EXCEEDS RS. 20,000/- BUT THE PAYMENTS MADE TO A SINGLE PERSON D OES NOT EXCEED RS. 20,000/-. THEREFORE, IT WAS SUBMITTED THAT THESE PA YMENTS WERE NOT HIT BY THE PROVISIONS OF SEC. 40A(3). 5. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING T HE MATERIAL ON RECORD, CIT(A) FOUND THAT THOUGH PAYMENTS HAD BEEN MADE IN CASH BUT THEY DID NOT EXCEED RS. 20,000/- TO SINGLE PERSON. ACCOR DINGLY, HE DIRECTED THE ASSESSING OFFICER TO DELETE THIS ADDITION. 6. LD. DR, ON THE OTHER HAND, PLACED RELIANCE ON TH E ORDER OF ASSESSING OFFICER . IT WAS FURTHER SUBMITTED THAT NO DETAILS PROVING THAT PAYMENT DOES NOT EXCEED RS. 20,000/- WERE FILED BEFORE ASSESSING OFFICER . 3 7. ON THE OTHER HAND, LD. AR OF THE ASSESSEE STATED THAT ALL THE DETAILS WERE FILED. SAMPLE COPIES WERE ALSO FILED PROVING T HAT SINGLE PAYMENT DOES NOT EXCEED RS. 20,000/-. SAMPLE COPIES REQUIRED BY THE BENCH WERE FILED HERE BEFORE THE TRIBUNAL ALSO. 8. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING T HE MATERIAL ON RECORD, WE FIND THAT CIT(A) WAS JUSTIFIED IN ALLOW ING THE ISSUE IN FAVOUR OF THE ASSESSEE. VARIOUS COPIES ON ACCOUNT OF VARIOUS EXPENSES, REIMBURSED BY THE ASSESSEE, ARE PLACED ON RECORD WHICH WERE FILED ON REQUIREMENT BY THE TRIBUNAL AND THEY SHOW THAT NO SINGLE PAYMENT EXCEE D RS. 20,000/-. THEREFORE, THEY ARE NOT HIT BY THE PROVISIONS OF SE C. 40A(3). THIS IS A FACTUAL FINDING GIVEN BY CIT(A) WHICH IS ASCERTAINABLE FRO M THE RECORDS. THEREFORE, IN OUR CONSIDERED VIEW, LD. CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE. ACCORDINGLY, WE UPHOLD HIS ORDER ON T HIS ISSUE. 9. REGARDING THE NEXT ISSUE I.E. DISALLOWANCE U/S 4 3B, IT WAS SUBMITTED BEFORE CIT(A) THAT SERVICE TAX LIABILITY WAS NOT P AID BEFORE FURNISHING OF THE RETURN OF INCOME AND THE SAME HAS NOT BEEN CLAIMED IN THE P&L A/C. THE SERVICE TAX PAYABLE AS ON 31-3-2009 IN THE BOOKS OF THE ASSESSEE SHOWS THE SERVICE TAX PAYABLE ON THE GROSS AMOUNT BILLED AND NOT THE AMOUNT PAYABLE AS PER THE GROSS AMOUNT RECEIVED BY THE ASSESSEE. T HE SERVICE TAX PAYABLE APPEARING IN THE BOOKS OF THE ASSESSEE IS NOT PAYAB LE TO THE GOVT. THEREFORE, PROVISIONS OF SEC. 43B ARE NOT APPLICABLE. IT WAS A LSO SUBMITTED THAT SERVICE TAX PAYABLE AS ON 31-3-2009 IS NOT A TRADING RECEIP T IN THE HANDS OF THE COMPANY AS THE SAME IS NOT COLLECTED FROM THE SERVI CE RECIPIENT AND PAYABLE TO THE GOVT. AS PER THE PROVISIONS OF THE SERVICE T AX LAWS. IT WAS ALSO SUBMITTED THAT SECTION 43B OF THE ACT IS APPLICABL E ON ANY SUM OF TAX, DUTY, CESS OR FEE ETC. AND ON SERVICE TAX IT IS NOT APPLI CABLE. IT WAS ALSO SUBMITTED THAT SERVICE TAX IS DIFFERENT FROM SALES-TAX, PROVI DENT FUND, ESI, EXCISE DUTY 4 ETC. AS THE SALES-TAX IS PAYABLE BY A DEALER AS PER SALES-TAX ACT WHEREAS SERVICE TAX IS NOT PAYABLE ON ACCOUNT OF TRADING RE CEIPTS. RELIANCE WAS PLACED ON VARIOUS CASE LAWS I.E. IN CASE OF REAL IM AGE MEDIA TECHNOLOGIES (ITAT CHENNAI); AND IN CASE OF NOBLE & HEWITT (I) P VT. LTD. (DELHI HIGH COURT). 10. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING THE MATERIAL ON RECORD, CIT(A) FOUND THAT ASSESSING OFFICER WAS N OT JUSTIFIED IN MAKING DISALLOWANCE U/S 43B AS ON SERVICE TAX THE PROVISIO NS OF SEC. 43B ARE NOT APPLICABLE. ACCORDINGLY, HE DELETED THE ADDITION. 11. LD. DR PLACED RELIANCE ON THE ORDER OF ASSESSIN G OFFICER . IT WAS FURTHER SUBMITTED THAT THOUGH AS PER THE DECISION OF HONBLE HIGH COURT THE PROVISIONS OF SEC. 43B ARE NOT ATTRACTED ON SERVICE TAX, THE SEGREGATION OF RECEIPT RECEIVED AND RECEIVABLE WAS NOT FILED. 12. IN REPLY, THE LD. AR OF THE ASSESSEE STATED THA T THE PAYMENTS WERE NOT RECEIVED AND THEREFORE THEY WERE SHOWN AS RECEIVABL E AND THEY WERE NOT PART OF TRADING RECEIPT AS THEY HAVE NOT BEEN SHOWN IN T HE P&L A/C. THEREFORE, THE PROVISIONS OF SEC. 43B ARE NOT ATTRACTED ON SER VICE TAX LAW. FURTHER RELIANCE WAS PLACED ON THE DECISION OF CIT(A). 13. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING THE MATERIAL ON RECORD AGAIN WE FIND NO INFIRMITY IN THE FINDING OF CIT(A ). FINDINGS OF CIT(A) HAVE BEEN RECORDED IN PARA 5.1 AT PAGE 7 OF HIS ORD ER, AS REPRODUCED BELOW: 5.1. REGARDING THE DISALLOWANCE OF SERVICE TAX IT WAS NOTICED THAT THE AO HAS DISALLOWED THE AFORESAID ADDITION O F RS. 41,59,667/- IN SPITE OF THE FACT THAT THE SAME WAS NOT CLAIMED BY THE APPELLANT COMPANY IN ITS PROFIT AND LOSS ACCOUN T. AS PER THE AO THE UNPAID SERVICE TAX COMES UNDER THE PURVIEW O F SEC. 43B AND THE SAME WAS DISALLOWED BEING NOT PAID ON O R BEFORE THE DUE DATE OF FILING OF RETURNED BY THE APPELLANT COMPANY. IT IS SEEN THAT THE SIMILAR ISSUE CAME UP BEFORE THE HON BLE ITAT 5 CHENNAI IN THE CASE OF ACIT VS. REAL IMAGE TECHNOLO GY P. LTD. [ 306 ITR 106] WHEREIN THE ADDITION MADE ON AC COUNT UNPAID SERVICE TAX WAS DELETED IT WAS HELD THAT THE RIGOR OF SECTION 43B OF THE INCOME TAX ACT, 1961 MAY BE APPL ICABLE IN THE CASE OF SALES-TAX OR EXCISE DUTY BUT THE SAME C ANNOT BE SAID TO BE THE POSITION IN CASE OF SERVICE-TAX SINC E SERVICE TAX WAS NOT PAYABLE BY THE ASSESSEE. IF THERE IS NO LIA BILITY TO MAKE THE PAYMENT TO THE CREDIT OF CENTRAL GOVERNMENT BEC AUSE OF NON RECEIPT OF PAYMENTS FROM THE RECEIVER OF THE SE RVICES, THEN IT CANNOT BE SAID THAT SUCH SERVICE TAX HAS BECOME PAYABLE IN TERMS OF CLAUSE (A) OF SECTION 43B BECAUSE THAT CLA USE SPECIFICALLY MENTIONS SUM PAYABLE BY THE ASSESSEE . IT WAS FURTHER HELD THAT THE ASSESSEE IS NEVER ALLOWED DED UCTION ON ACCOUNT OF SERVICE TAX WHICH IS COLLECTED ON BEHALF OF THE GOVT. AND PAID TO THE GOVT. ACCORDINGLY. THEREFORE, A SER VICE PROVIDER IS MERELY ACTING AS AN AGENT OF THE GOVT. AND IS NOT ENTITLED TO CLAIM DEDUCTION ON ACCOUNT OF SERVICE T AX . SIMILARLY, THE HONBLE HIGH COURT OF DELHI IN THE C ASE OF CIT VS. NOBLE & HEWITT (I) (P) LTD. [305 ITR 324] HELD THAT NON DEPOSIT OF SERVICE TAX CANNOT BE ADDED TO THE INCOM E OF THE ASSESSEE U/S 43B OF THE INCOME TAX ACT SINCE THE AS SESSEE DID NOT DEBIT THE SERVICE TAX TO THE P&L ACCOUNT AS AN EXPENDITURE NOR DID THE ASSESSEE CLAIM AN EXPENDITURE IN RESPEC T OF THE AMOUNT. THE RELEVANT EXTRACTS OF THE AFORESAID ORDE R IS REPRODUCED BELOW FOR READY REFERENCE: 6. IN OUR OPINION SINCE THE ASSESSEE DID NOT DEBIT THE AMOUNT TO THE PROFIT & LOSS ACCOUNT AS AN EXPENDITURE NOR DID THE ASSESSEE CLAIM ANY DEDUCTION IN RESPECT OF THE AMOUNT AND CONSIDERING THAT THE ASSESSEE IS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING, THE QUESTION OF DISALLOWING THE DEDUCTION NOT CLAIMED WOULD NOT ARISE. 5.2 SINCE THE FACTS AND CIRCUMSTANCES OF THE PRESENT CA SE ARE IDENTICAL, RESPECTFULLY FOLLOWING THE DECISION OF T HE HONBLE HIGH COURT OF DELHI IN THE ABOVE MENTIONED CASE, TH E AO IS DIRECTED TO DELETE THE ADITION OF RS. 41,59,667/- U /S 43B OF THE IT ACT. 6 14. THESE FINDINGS ARE IN CONSONANCE WITH THE ORDER OF THE TRIBUNAL IN THE CASE OF REAL IMAGE MEDIA TECHNOLOGIES 306 ITR 106 ( AT). IN THE CASE OF NOBLE & HEWITT (I) PVT. LTD. 305 ITR 324 (DEL.), TH E HONBLE DELHI HIGH COURT HAS HELD THAT NON DEPOSIT OF SERVICE TAX CANN OT BE ADDED TO THE INCOME OF THE ASSESSEE U/S 43B OF THE ACT, SINCE THE ASSES SEE DID NOT DEBIT THE SERVICE TAX TO THE P&L A/C AS AN EXPENDITURE NOR DI D THE ASSESSEE CLAIMED ANY EXPENDITURE IN RESPECT OF AMOUNT. SIMILAR FACTS ARE INVOLVED IN THE PRESENT CASE. THEREFORE, RATIO OF THE DECISION OF T HE HONBLE DELHI HIGH COURT IS SQUARELY APPLICABLE. 15. IN VIEW OF THESE FACTS AND CIRCUMSTANCES AND IN VIEW OF THE ABOVE FINDING OF THE CIT(A) WE CONFIRM THE ORDER OF CIT (A) ON THIS ISSUE ALSO. 16. IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 09-08-2012. SD/- SD/- ( A.N. PAHUJA ) ( R.K. GUPTA ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 09-08-2012. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR 7