ELCOME SURVEYS P. LTD, NAVI MUMBAI V. ACIT 10(3), MUMBAI

ITA 2924/MUM/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62196 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-04-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 26-03-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 13-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D S SUNDER SINGH
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE APPELLATE APPELLATE APPELLATE TRIBUNAL MUMBAI BENCH J MUMBAI BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER & SHRI VIJAY PAL RAO, JUDICIAL MEMBER I.T.A.NO.2924/MUM/2010 A.Y 2007-08 ELCOME SURVEYS PRIVATE LIMITED, PLOT NO. D-222/30, TTC INDUSTRIAL AREA, MIDC, NERUL, NAVI MUMBAI 400 706. PAN: AAACE 3415 G VS. ASST. COMMISSIONER OF I.T. 10(3), MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. AARTI VISSANJI & SHRI SHALIN S. DIVATIA. RESPONDENT BY : SHRI D.S.SUNDER SINGH. DATE OF HEARING: 29-03-2012. DATE OF PRONOUNCEMENT: 04-04-2012. O R D E R PER T.R.SOOD, AM: IN THIS APPEAL VARIOUS GROUNDS HAVE BEEN RAISED BUT AT THE TIME OF HEARING IT WAS SUBMITTED BY THE LD. COUNSEL OF T HE ASSESSEE THAT BASICALLY THE ISSUE IS REGARDING ADDITION U/S.43B F OR NON PAYMENT OF SERVICE TAX. 2. THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT T HE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE CHENNAI BEN CH OF THE TRIBUNAL IN THE CASE OF ACIT VS. REAL IMAGE MEDIA TECH. (P) LTD. [114 ITD 573] AND THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. NOBLE AND HEWITT (I) P. LTD. (305 ITR 324). ITA NO.2924 OF 2010 2 3. ON THE OTHER HAND, LD. DR STRONGLY RELIED ON THE ORDER OF THE CIT(A). 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFUL LY AND FIND THAT IN THE CASE OF ACIT VS. REAL IMAGE MEDIA TECH. (P) LTD. [SUPRA] THE HEAD-NOTE READS AS UNDER: SECTION 43B OF THE INCOME-TAX ACT, 1961 - BUSINESS DISALLOWANCE - CERTAIN DEDUCTIONS TO BE ALLOWED ONLY ON ACTUAL PAY MENT ASSESSMENT YEAR 2002-03 - ASSESSEE-COMPANY WAS ENGAGED IN BUSI NESS OF RUNNING A RECORDING AND DUBBING STUDIO; PRODUCTION OF ADVER TISEMENT FILMS AND SOFTWARE DEVELOPMENT, ETC., - DURING ASSESSMENT PRO CEEDINGS, ASSESSING OFFICER NOTICED THAT SERVICE TAX WAS NOT BEING ROUTED THROUGH PROFIT AND LOSS ACCOUNT AND THAT ASSESSEE HAD SHOWN LIABILITY TOWARDS SERVICE TAX IN ITS BALANCE-SHEET - ASSESSING OFFICE R, TAKING VIEW THAT SERVICE TAX COLLECTED BUT NOT PAID TO GOVERNMENT AC COUNT WAS REVENUE RECEIPT, MADE ADDITION TO ASSESSEES INCOME - ON AP PEAL, COMMISSIONER (APPEALS) DELETED ADDITION HOLDING THA T FOR APPLICABILITY OF SECTION 43B, CLAIM SHOULD BE FIRST PREFERRED BY ASSESSEE AND SAME SHOULD BE DISALLOWED FOR REASON OF FAILURE TO MAKE PAYMENT BUT, SINCE, IN INSTANT CASE, ASSESSEE HAD NOT EVEN PREFERRED AN Y CLAIM TOWARDS SERVICE TAX, THERE WAS NO QUESTION OF DISALLOWING S AME - WHETHER SINCE A SERVICE PROVIDER MERELY ACTS AS AN AGENT OF GOVER NMENT AND IS NOT ENTITLED TO CLAIM DEDUCTION ON ACCOUNT OF SERVICE T AX, ON THIS ACCOUNT ALONE ADDITION UNDER SECTION 43B COULD NOT HAVE BEE N MADE AND, THUS, SAME HAD BEEN CORRECTLY DELETED BY COMMISSIONER (AP PEALS) - HELD, YES. SIMILARLY, THE HON'BLE DELHI HIGH COURT IN CIT VS. . NOBLE AND HEWITT (I) P. LTD. [SUPRA] HAS OBSERVED AS UNDER: 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 ASSESSEE WAS MAINT AINING ACCOUNTS ON THE MERCANTILE SYSTEM IT WOULD BE ENTITLED TO DEDUCTIO N OF THE ESTIMATED LIABILITY OF SALES TAX, EVEN THOUGH SUCH SALES TAX HAD NOT B EEN PAID TO THE SALES TAX AUTHORITIES. THE QUESTION THERE CONCERNED WAS THE E NTITLEMENT OF THE ASSESSEE TO DEDUCTION UNDER SECTION 10(1) AND 10(2)(XV) OF THE INDIAN INCOME-TAX ACT, 1922. THE DECISION IS CLEARLY DISTINGUISHABLE IN IT S APPLICATION TO THE PRESENT CASE. HERE WE ARE CONCERNED WITH AN ASSESSEE WHO HA S 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 O F SECTION 43B OF THE ACT ITA NO.2924 OF 2010 3 ARE QUITE CLEAR IN THIS REGARD. THE DECISION OF THE CALCUTTA HIGH COURT IN CHOWRINGHEE 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 CONSIDERING THAT THE ASSESSEE IS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING, THE QUESTION OF DISALLOWING THE DEDUCTION NOT CLAIMED WOULD NOT ARISE. 7. LEARNED COUNSEL FOR THE REVENUE SUBMITS THAT THE ASSESSEE HAS SOUGHT TO EVADE TAX UNDER THE MERCANTILE SYSTEM OF ACCOUNT ING. WE ARE OF THE VIEW THAT IT IS NOT FOR THE REVENUE AUTHORITIES TO TELL THE ASSESSEE HOW TO MAINTAIN ITS ACCOUNTS. THEREFORE, FOLLOWING THE ABOVE DECISIONS, WE DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. 5. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 4 /4/2012. SD/- SD/- (VIJAY PAL RAO) (T.R.SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 4/4/2012. P/-*