Appeal details
Counselvise Citation
[2021] 108 COUNSELVISE.COM (IT) 3251 (ITAT-BANGALORE)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 3 month(s) 27 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
15-06-2021
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
C
Next Hearing Date
25-03-2021
Assessment Year
2012-2013
Appeal Filed On
19-02-2019
Judgement Text
ITA NOS.300 & 301/BANG/2019 KEN CONSULTING PVT. LTD., BANGALORE IN THE INCOME TAX APPELLATE TRIBUNAL CBENCH: BANGALORE BEFORE SHRI B. R. BASKARAN, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA NO.300 & 301/BANG/2019 ASSESSMENT YEAR: 2012 13 KEN CONSULTING PRIVATE LTD. NO.46/1, NOVEL TECH PARK GARVEBHAVI PALYA KUDLU GATE, HOSUR ROAD BANGALORE 560 068. PAN NO : AABCK5070G VS. DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE-4(1)(1) BANGALORE APPELLANT RESPONDENT APPELLANT BY : SHRI S. RAMASUBRAMANIAN, A.R. RESPONDENT BY : SMT. R. PREMI, D.R. DATE OF HEARING : 25.03.2021 DATE OF PRONOUNCEMENT : 15.06.2021 O R D E R PER B.R. BASKARAN, ACCOUNTANT MEMBER: BOTH THE APPEALS HAVE BEEN FILED BY THE ASSESSEE AN D THEY ARE DIRECTED AGAINST THE ORDERS PASSED BY LD. CIT(A)-4, BENGALURU AND THEY RELATE TO ASSESSMENT YEAR 2012-13. THE APPEAL NUMBERED AS ITA 300/BANG/2019 IS DIRECTED AGAINST THE ORDER PAS SED BY LD. CIT(A) U/S 154 OF THE INCOME-TAX ACT,1961 ['THE ACT ' FOR SHORT]; WHILE THE OTHER APPEAL RELATES TO THE ORDER PASSED AGAINST QUANTUM ASSESSMENT ORDER. ITA NOS.300 & 301/BANG/2019 KEN CONSULTING PVT. LTD., BANGALORE PAGE 2 OF 10 2. THE ISSUES CONTESTED IN BOTH THE APPEALS RELATE TO ADDITION OF OUTSTANDING SERVICE TAX LIABILITY AMOUNT OF RS.55.0 3 LAKHS U/S 43B OF THE ACT. 3. IN THE APPELLATE ORDER, THE LD. CIT(A) CONFIRMED THE ADDITION OF SERVICE TAX PAYABLE AMOUNT MADE U/S 43B OF THE A CT. HENCE, THE ASSESSEE FILED A RECTIFICATION APPLICATION BEFORE L D. CIT(A) SUBMITTING THAT THE ASSESSEE HAS NOT CLAIMED THE SE RVICE TAX LIABILITY AS DEDUCTION IN THE PROFIT & LOSS ACCOUNT AND HENCE, THE PROVISIONS OF SECTION 43B OF THE ACT WOULD NOT APPL Y. THE SAME WAS REJECTED BY LD. CIT(A) AND HENCE, THE ASSESSEE HAS FILED AN APPEAL AGAINST BOTH ORIGINAL APPELLATE ORDER AS WELL AS RE CTIFICATION ORDER. 4. THE APPEAL FILED BY THE ASSESSEE AGAINST THE INI TIAL APPELLATE ORDER IS BARRED BY LIMITATION BY 443 DAYS. THE ASS ESSEE HAS FILED A PETITION REQUESTING THE BENCH TO CONDONE THE DELAY. IT IS STATED THAT THE ASSESSEE HAD FILED RECTIFICATION APPLICATION BE FORE LD. CIT(A) AND HENCE, THE ASSESSEE DID NOT FILE APPEAL INITIALLY. WHEN THE RECTIFICATION APPLICATION WAS REJECTED BY THE LD. C IT(A), THE ASSESSEE WAS ADVISED THAT IT SHOULD FILE APPEAL AGAINST BOTH INITIAL APPELLATE ORDER AS WELL AS AGAINST RECTIFICATION ORDER. HENC E, THE ASSESSEE HAS FILED THE APPEAL AGAINST INITIAL APPELLATE ORDER BE LATEDLY. THE LD. A.R. SUBMITTED THAT THE ASSESSEE WAS NOT KEEPING QU IET AFTER THE RECEIPT OF APPELLATE ORDER AND IT WAS PURSUING THE MATTER BY FILING RECTIFICATION APPLICATION BEFORE LD CIT(A), I.E., I T WAS PURSUING AN ALTERNATIVE REMEDY. HENCE, THERE WAS NO WILFUL OR WANTON DELAY IN FILING THE APPEAL BEFORE APPELLATE TRIBUNAL. ACCOR DINGLY, HE PRAYED THAT THE DELAY MAY KINDLY BE CONDONED. 5. WE HEARD LD. D.R. ON THIS PRELIMINARY ISSUE. HAV ING REGARD TO THE SUBMISSIONS MADE BY ASSESSEE IN THE PETITION, W E ARE OF THE VIEW THAT THERE WAS SUFFICIENT CAUSE FOR NOT FILING THE APPEAL IN TIME. ITA NOS.300 & 301/BANG/2019 KEN CONSULTING PVT. LTD., BANGALORE PAGE 3 OF 10 ACCORDINGLY, WE CONDONE THE DELAY AND ADMIT THE APP EAL FOR HEARING. 6. IN THE PRECEDING PARAGRAPHS, WE HAVE CONDONED THE DELAY IN FILING APPEAL AGAINST THE INITIAL APPELLATE ORDER. WE SHALL BE DEALING WITH THE ISSUE RELATING TO THE ADDITION MADE U/S 43 B OF THE ACT IN THE ABOVE SAID APPEAL FILED AGAINST ORIGINAL APPELL ATE ORDER. THE APPEAL FILED BY THE ASSESSEE AGAINST RECTIFICATION ORDER ALSO DEAL WITH THE VERY SAME ISSUE AND HENCE, THERE IS NO NEC ESSITY TO DISPOSE OF THE SAME SEPARATELY. ACCORDINGLY, WE DISMISS T HE APPEAL FILED AGAINST THE RECTIFICATION ORDER (ITA NO.300/BANG/20 19) AS INFRUCTUOUS. 7. THE ONLY ISSUE URGED IN THE APPEAL RELATES TO DI SALLOWANCE MADE U/S 43B OF THE ACT. THE A.O. NOTICED THAT THE RE WAS AN OUTSTANDING LIABILITY OF RS.55.03 LAKHS IN RESPECT OF SERVICE TAX PAYABLE BY THE ASSESSEE AS AT THE YEAR END. SINCE THE ASSESSEE DID NOT DISALLOW THE SAME VOLUNTARILY AS PER THE REQUIR EMENT OF SECTION 43B OF THE ACT, THE A.O. DISALLOWED THE SAME. THE LD. CIT(A) ALSO CONFIRMED THE SAME. 8. THE LD. A.R. SUBMITTED THAT THE ASSESSEE HAS MAI NTAINED THE SERVICE TAX ACCOUNT AS A BALANCE SHEET ITEM, I.E, I T DID NOT ROUTE THROUGH THE COLLECTION AND PAYMENTS OF SERVICE TAX THROUGH THE PROFIT & LOSS ACCOUNT. HENCE THE ASSESSEE HAS NOT CLAIMED ANY DEDUCTION TOWARDS SERVICE TAX LIABILITY. HE SUBMIT TED THAT THE PROVISIONS OF SECTION 43B OF THE ACT SHALL APPLY ON LY IF AN ITEM IS CLAIMED AS DEDUCTION, WHICH IS EVIDENT FROM THE REA DING OF INITIAL PART OF SEC.43B. HE SUBMITTED THAT THE PROVISIONS O F SEC.43B STARTS WITH THE PHRASE NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISIONS OF THIS ACT, A DEDUCTION OTHERWISE ALLOWABLE UNDER THIS ACT . IF THE ASSESSEE HAS NOT CLAIMED THE SERVI CE TAX LIABILITY AS ITA NOS.300 & 301/BANG/2019 KEN CONSULTING PVT. LTD., BANGALORE PAGE 4 OF 10 DEDUCTION, THE QUESTION OF APPLYING SECTION 43B OF THE ACT DOES NOT APPLY. HE SUBMITTED THAT AN IDENTICAL ISSUE WAS CO NSIDERED BY THE COORDINATE BENCH IN THE CASE OF N.R. KUMARASWAMY (I TA NO.1778/BANG/2017 DATED 31.5.2018) AND THE COORDINA TE BENCH HAS DELETED THE ADDITION MADE U/S 43B OF THE ACT BY FOLLOWING THE DECISION RENDERED BY HONBLE BOMBAY HIGH COURT IN T HE CASE OF CIT VS. KNIGHT FRANK (INDIA) PVT. LTD. (2016) 72 TAXMAN .COM 300 (BOM). 9. THE LD. D.R., ON THE CONTRARY, SUBMITTED THAT TH E ASSESSEE DID NOT FURNISH ANY DETAIL REGARDING PAYMENT OF OUT STANDING LIABILITY OF SERVICE TAX EITHER BEFORE A.O. OR BEFORE LD. CIT (A). SHE FURTHER SUBMITTED THAT SERVICE TAX IS A TRADING RECEIPT. T HE PROVISIONS OF SEC.43B HAVE BEEN BROUGHT INTO THE ACT ONLY TO ENSU RE PROMPT PAYMENT OF VARIOUS TAX LIABILITIES DUE TO GOVERNMEN T. HENCE THE PROVISIONS OF SEC.43B SHALL SQUARELY APPLY EVEN IF THE ASSESSEE HAS NOT ROUTED THE SERVICE TAX COLLECTIONS AND PAYMENTS THROUGH PROFIT & LOSS ACCOUNT. SHE SUBMITTED THAT, CONSIDERING TH E OBJECT BEHIND INTRODUCTION OF SEC.43B, THE PROVISIONS OF SECTION 43B OF THE ACT SHALL BE ATTRACTED. AS PER THE PROVISIONS OF SEC. 43B, NO ADDITION SHALL BE MADE IF THE TAX LIABILITY IS PAID BEFORE T HE DUE DATE FOR FILING RETURN OF INCOME. HOWEVER, THE ASSESSEE HAS FURNISH ED DETAILS OF PAYMENT TILL DATE. ACCORDINGLY, SHE SUBMITTED THAT THE LD. CIT(A) WAS JUSTIFIED IN CONFIRMING THE ADDITION MADE BY TH E A.O. U/S 43B OF THE ACT. 10. WE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORD. IN THE INSTANT CASE, THE ASSESSEE HAS NOT ROUTED THE SERVI CE TAX COLLECTIONS AND PAYMENTS THROUGH THE PROFIT AND LOSS ACCOUNT. THE LD D.R SUBMITTED THAT THE SERVICE TAX COLLECTION IS A TRAD ING RECEIPT. HER SUBMISSIONS ARE SUPPORTED BY THE DECISION RENDERED BY HONBLE SUPREME COURT IN THE CASE OF CHOWRINGHEE SALES BURE AU (PVT.) LTD. ITA NOS.300 & 301/BANG/2019 KEN CONSULTING PVT. LTD., BANGALORE PAGE 5 OF 10 VS. CIT REPORTED IN 87 ITR 542. HOWEVER, IN THE IN STANT CASE, WE ARE CONCERNED WITH THE APPLICABILITY OF THE PROVISI ONS OF SEC.43B TO THE ISSUE ON HAND. THERE CANNOT BE ANY DISPUTE THA T THE PROVISIONS OF INCOME TAX, WHICH IMPOSE LIABILITY, SHOULD BE CO NSTRUED STRICTLY. THE PROVISIONS OF SEC.43B OF THE ACT USE THE EXPRES SION A DEDUCTION OTHERWISE ALLOWABLE. HENCE THE QUESTION THAT ARISES IS WHETHER THE PROVISIONS OF SEC.43B IS ATTRACTED WHEN NO DEDUCTION WAS CLAIMED BY THE ASSESSEE. 11. THE CO-ORDINATE BENCH, IN THE CASE OF N.R KU MARASWAMY (SUPRA) HAS TAKEN THE VIEW THAT THE PROVISIONS OF S EC.43B ARE NOT ATTRACTED, IF THE TAX LIABILITY IS NOT CLAIMED AS D EDUCTION. THE CO- ORDINATE BENCH HAS TAKEN SUPPORT OF THE DECISION RE NDERED BY HONBLE BOMBAY HIGH COURT IN THE CASE OF KNIGHT & FRANK (INDIA)(P) LTD (SUPRA). WE ALSO NOTICE THAT THE AH MEDABAD BENCH OF TRIBUNAL HAS TAKEN AN IDENTICAL VIEW IN THE CASE OF SDCE PROJECTS (P) LTD (ITA NO.2556/AHD/2017 DATED 01-10-2019). T HE AHMEDABAD BENCH HAS FOLLOWED THE DECISION RENDERED BY HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. NOBLE & HEWITT (I)(P) LTD REPORTED IN 166 TAXMAN 48. WE NOTICE THAT THE HON BLE DELHI HIGH COURT HAS CONSIDERED THE DECISION RENDERED BY HONBLE SUPREME COURT IN THE CASE OF CHOWRINGHEE SALES BURE AU (PVT.) LTD (SUPRA) AND THEN EXPRESSED THE VIEW THAT THE PROVIS IONS OF SEC.43B ARE NOT ATTRACTED, IF THE PARTICULAR ITEM IS NOT CL AIMED AS DEDUCTION. 12. WE NOTICE THAT THE AHMEDABAD BENCH HAS PASSE D A DETAILED ORDER IN THE CASE OF SDCE PROJECTS (P) LTD (SUPRA). FOR THE SAKE OF CONVENIENCE, WE EXTRACT BELOW THE RELEVANT DISCUSSI ONS MADE BY AHMEDABAD BENCH OF TRIBUNAL, IN THE ABOVE CITED CAS E:- 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE MAJOR THRUST OF THE LEARNED CIT (A) WAS THAT THE IMPUGNED AMOUNT OF SERVICE TAX, NOT DEPOSITED WITHI N THE DUE DATE OF FILING RETURN, ITA NOS.300 & 301/BANG/2019 KEN CONSULTING PVT. LTD., BANGALORE PAGE 6 OF 10 HAS TO BE TREATED AS TRADING RECEIPTS IN VIEW OF TH E JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF CHOWRINGHEE SALES BUREAU (PVT. ) LTD. VS. CIT REPORTED IN 87 ITR 542 WHICH READS AS UNDER: THE AMOUNT REALISED ON SALES TAX BY THE ASSESSEE IN HIS CHARACTER AS AN AUCTIONEER FORMED PART OF ITS TRADING OR BUSINESS R ECEIPTS. THE SUPREME COURT FURTHER HELD THAT THE FACT THAT ASSESSEE CRED ITED THE AMOUNT RECEIVED AS SALES TAX UNDER THE HEAD 'SALES TAX COLLECTION A CCOUNT' DID NOT MAKE ANY MATERIAL DIFFERENCE. THE LIABILITY TO PAY SALES TAX ARISES THE MOMENT SALE OR PURCHASE IS EFFECTED. THE FACT THAT THAT LIABILITY HAS NOT BEEN QUANTIFIED FOR PAYMENT, WHICH THE LAW ENJOINS AN ASSESSEE TO DO, I S NOT RELEVANT IN DETERMINING ACCRUAL OF LEGAL LIABILITY. IF THAT IS THE POSITION, IN ORDER TO DETERMINE THAT LIABILITY WHERE THE ASSESSEE HAD NOT PAID THE AMOUNT, IT MUST BE, ACCORDING TO THE SCHEME OF THE SALES TAX ACT , AN ESTIMATE OF THE ASSESSEE. IN THE INSTANT CASE, IT WAS NEVER SUGGESTED THAT TH E ESTIMATE MADE BY THE ASSESSEE OR THE ESTIMATE FOR THE RELEVANT YEARS WAS EITHER EXCESSIVE OR INACCURATE. THEREFORE, FOR AN ASSESSEE WHO WAS MAIN TAINING ACCOUNTS UNDER THE MERCANTILE SYSTEM OF ACCOUNTING THE LIABI LITY HAD ARISEN AND IF THE ASSESSEE HAD ESTIMATED HIS LIABILITY, THAT LIABILIT Y THE ASSESSEE WAS ENTITLED TO DEDUCTION. BUT, IF IN SUBSEQUENT YEARS IT WAS FO UND OUT THAT THE ESTIMATE WAS EITHER EXCESSIVE OR WRONG AND THE AMOUNT OF SAL ES TAX PAYABLE WOULD BE LESS, THEN TO THAT EXTENT THERE WOULD BE A CESSE R OF LIABILITY IN TERMS OF SECTION 41 , AND THE ASSESSEE WOULD BE LIABLE TO PAY TAX TO TH E DEPARTMENT FOR THAT AMOUNT. THEREFORE, IN THE INSTANT CASE, THE SALES TAX AMOUN T REALISED BY THE ASSESSEE FORMED PART OF ITS TRADING RECEIPTS. HOWEVER, THE A SSESSEE WAS ENTITLED TO DEDUCTION INASMUCH AS THE LIABILITY HAD ARISEN FOR PAYMENT OF SALES TAX FOR THE RELEVANT YEARS, EVEN THOUGH THESE AMOUNTS HAD N OT BEEN PAID TO THE SALES-TAX AUTHORITIES 6.1 THE AFORESAID JUDGMENT WAS RENDERED BY THE HON' BLE COURT IN THE YEAR 1973 WHEREAS THE PROVISION OF SECTION 43B WAS BROUGHT UNDER THE STATUTE WITH EFFECT FROM 01-04-1983. THUS IT IS CLEAR THAT THE AFORESAI D JUDGMENT WAS NOT RENDERED IN THE CONTEXT OF THE PROVISION OF SECTION 43B OF THE ACT. IN HOLDING SO WE FIND SUPPORT AND GUIDANCE FROM THE JUDGMENT OF HON'BLE DELHI HIG H COURT IN THE CASE OF CIT VS. NOBLE & HEWITT (I)(P) LTD REPORTED IN 166 TAXMAN 48 WHEREIN IT WAS HELD AS UNDER: 'LEARNED COUNSEL FOR THE REVENUE URGES THAT THE DEC ISION OF THE CALCUTTA HIGH COURT IN CHOWRINGHEE SALES BUREAU (P.) LTD.'S CASE (SUPRA) 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 S ALE OR PURCHASE WAS EFFECTED AND IF AN ASSESSEE WAS MAINTAINING ACCOUNT S ON THE MERCANTILE SYSTEM IT WOULD BE ENTITLED TO DEDUCTION OF THE EST IMATED LIABILITY OF SALES TAX, EVEN THOUGH SUCH SALES TAX HAD NOT BEEN PAID T O THE SALES TAX AUTHORITIES. THE QUESTION THERE CONCERNED WAS THE E NTITLEMENT OF THE ITA NOS.300 & 301/BANG/2019 KEN CONSULTING PVT. LTD., BANGALORE PAGE 7 OF 10 ASSESSEE TO DEDUCTION UNDER SECTIONS 10(1) AND 10(2)(XV) OF THE INDIAN INCOME-TAX ACT, 1922. THE DECISION IS CLEARLY DISTI NGUISHABLE IN ITS APPLICATION TO THE PRESENT CASE. HERE WE ARE CONCER NED WITH AN ASSESSEE WHO HAS NOT EVEN CLAIMED ANY DEDUCTION ON THE GROUN D OF SERVICE TAX AND HAS NOT DEBITED THE AMOUNT TO ITS PROFIT & LOSS ACC OUNT. MOREOVER THE PROVISIONS OF SECTION 43B OF THE ACT ARE QUITE CLEAR IN THIS REGARD. THE DECISION OF THE CALCUTTA HIGH COURT IN CHOWRINGHEE SALES BUREAU (P.) LTD.'S CASE (SUPRA) WAS NOT IN THE CONTEXT OF THE A PPLICABILITY OF SECTION 43B OF THE ACT.' 6.2 WE FURTHER NOTE THAT THE HON'BLE SUPREME COURT IN THE CASE OF CHOWRINGHEE SALES BUREAU (PVT.) LTD. (SUPRA) HAS ALSO OBSERVED THAT THE ASSESSEE SHALL BE ENTITLED FOR THE DEDUCTION ON ACCOUNT OF SALES TAX LIABILITY AS AND WHEN IT WILL BE INCURRED IRRESPECTIVE OF THE ACTUAL PAYMENT. THE RE LEVANT FINDING OF THE HON'BLE APEX COURT STANDS UNDER: 'THE SALES TAX AMOUNT REALISED BY THE ASSESSEE FORM ED PART OF ITS TRADING RECEIPTS. HOWEVER, THE ASSESSEE WAS ENTITLED TO DED UCTION INASMUCH AS THE LIABILITY HAD ARISEN FOR PAYMENT OF SALES TAX FOR T HE RELEVANT YEARS, EVEN THOUGH THESE AMOUNTS HAD NOT BEEN PAID TO THE SALES -TAX AUTHORITIES'. 6.3 THUS FROM THE ABOVE, THERE REMAINS NO AMBIGUITY TO THE FACT THAT THERE WAS NO DISPUTE IN CONNECTION WITH THE DEDUCTION OF CERTAIN EXPENSES ON ACTUAL PAYMENT BASIS. IN VIEW OF THE ABOVE, WE ARE NOT INCLINED TO RELY ON THE JUDGMENT OF HON'BLE APEX COURT IN THE CASE OF CHOWRINGHEE SALES BUREAU (PVT.) LTD. BEING DISTINGUISHABLE FROM THE PRESENT FACTS OF THE CASE. 6.4 SIMILARLY, WE FURTHER NOTE THAT THE OTHER CASE LAWS AS RELIED BY THE LEARNED CIT (A) NAMELY SUNDER PRINTING PRESS (SUPRA) AND IDEAL SHEET METAL STAMPINGS & PRESSING PVT. LTD. (SUPRA) ARE DISTINGUISHABLE FROM THE FACTS OF THE CASE ON HAND IN SO FAR THESE ARE RELATED TO SALES TAX AND EXCISE DU TY LIABILITY. AS SUCH, THE PROVISION OF SECTION 145A OF THE ACT MANDATES TO INCLUDE THE AMOUNT OF SALES TAX AND EXCISE DUTY AS PART OF THE TURNOVER/SALE PRICE. THE PROVIS ION OF SECTION 145A OF THE ACT READS AS UNDER: 'NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN SECTION 145 ,-- THE VALUATION OF PURCHASE AND SALE OF GOODS AND INVENTO RY FOR THE PURPOSES OF DETERMINING THE INCOME CHARGEABLE UNDER THE HEAD 'P ROFITS AND GAINS OF BUSINESS OR PROFESSION' SHALL BE-- A. IN ACCORDANCE WITH THE METHOD OF ACCOUNTING REGU LARLY EMPLOYED BY THE ASSESSEE; AND B. FURTHER ADJUSTED TO INCLUDE THE AM OUNT OF ANY TAX, DUTY, CESS OR FEE (BY WHATEVER NAME CALLED) ACTUALLY PAID OR INCURRED BY THE ASSESSEE TO BRING THE GOODS TO THE PLACE OF ITS LOC ATION AND CONDITION AS ON THE DATE OF VALUATION. EXPLANATION.--FOR THE PURPOSES OF THIS SECTION*, AN Y TAX, DUTY, CESS OR FEE (BY WHATEVER NAME CALLED) UNDER ANY LAW FOR THE TIM E BEING IN FORCE, SHALL INCLUDE ALL SUCH PAYMENT NOTWITHSTANDING ANY RIGHT ARISING AS A CONSEQUENCE TO SUCH PAYMENT' ITA NOS.300 & 301/BANG/2019 KEN CONSULTING PVT. LTD., BANGALORE PAGE 8 OF 10 6.5 A PLAIN READING OF THE ABOVE PROVISION REVEALS THAT IT IS CONFINED TO THE PURCHASE AND SALE OF GOODS AND THE DETERMINATION OF THE INVENTORIES. AS SUCH THE PROVISION OF SECTION 145A OF THE ACT REQUIRES THE ASSESSEE TO INCLUDE THE AM OUNT OF ANY TAX, DUTY, CESS OR FEE IN THE VALUE OF THE PURC HASES, SALES AND INVENTORIES. THE PROVISION OF SECTION 145A OF THE ACT DOES NOT REQUIRE THE ASSESSEE TO INCLUD E THE AMOUNT OF SERVICE TAX EITHER IN THE PURCHASES OR SA LES. THEREFORE, WE ARE NOT INCLINED TO PLACE OUR RELIANCE ON THE CASE LAWS AS REFERRED BY THE LEARNED CIT-A IN HIS ORDER. 6.6 NOW, THE CONTROVERSY ARISES WHETHER THE IMPUGN ED AMOUNT OF SERVICE TAX FOR RS. 25,40,376/- PAID AFTER THE DUE DATE OF FILING O F INCOME TAX RETURN, IS LIABLE TO BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE UNDER THE PROVISIONS OF SECTION 43B OF THE ACT. AT THIS JUNCTURE, WE ARE INCLINED TO REFER THE RELEVANT PROVISIONS OF SECTION 43B OF THE ACT WHICH READS AS UNDER: NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PRO VISION OF THIS ACT, A DEDUCTION OTHERWISE ALLOWABLE UNDER THIS ACT IN RES PECT OF-- (A) ANY SUM PAYABLE BY THE ASSESSEE BY WAY OF TAX, DUTY, CESS OR FEE, BY WHATEVER NAME CALLED, UNDER ANY LAW FOR THE TIME BE ING IN FORCE, OR] XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXX SHALL BE ALLOWED (IRRESPECTIVE OF THE PRE VIOUS YEAR IN WHICH THE LIABILITY TO PAY SUCH SUM WAS INCURRED BY THE A SSESSEE ACCORDING TO THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY HIM) ONL Y IN COMPUTING THE INCOME REFERRED TO IN SECTION 28 OF THAT PREVIOUS YEAR IN WHICH SUCH SUM IS ACTUALLY PAID BY HIM 6.7 THE ABOVE PROVISIONS DEALS WITH CERTAIN DEDUCTI ON ALLOWABLE UNDER THE ACT FROM THE TOTAL INCOME OF THE ASSESSEE BUT SUCH DEDU CTIONS WILL NOT BE ALLOWED UNTIL AND UNLESS THE ACTUAL PAYMENT IS MADE BY THE ASSESS EE. IN THE CASE ON HAND, THE ASSESSEE WAS NEITHER SHOWING ANY INCOME ON ACCOUNT OF SERVICE TAX COLLECTED FROM THE ASSESSEE NOR IT WAS CLAIMING ANY EXPENDITURE ON ACCOUNT OF SUCH SERVICE TAX. AS SUCH THE ASSESSEE WAS SHOWING THE AMOUNT OF SERVICE TAX COLLECTED FROM THE CUSTOMERS AS LIABILITY WITHOUT CREDITING THE SAME I N THE PROFIT AND LOSS ACCOUNT AND SIMILARLY IT WAS MAKING THE PAYMENT OF THE SERV ICE TAX AMOUNT WITHOUT DEBITING THE PROFIT AND LOSS ACCOUNT . MOREOVER, THERE IS NO MANDATE UNDER THE ACT TO ROUTE THE AMOUNT OF SERVICE TAX COLLECTED AND PA ID THROUGH THE PROFIT AND LOSS ACCOUNT. THEREFORE, IN OUR CONSIDERED VIEW, THERE I S NO QUESTION OF MAKING THE ADDITION OF THE SERVICE TAX AMOUNT TO THE TOTAL INC OME OF THE ASSESSEE IN THE EVENT IT IS NOT PAID WITHIN THE DUE DATE OF FILING INCOME TA X RETURN AS SPECIFIED UNDER SECTION 139(1) OF THE ACT. 6.8 IN HOLDING SO WE DRAW SUPPORT FROM THE JUDGMENT OF HON'BLE DELHI HIGH COURT IN THE CASE OF NOBLE & HEWITT (I)(P) LTD. (SUPRA) W HEREIN IT WAS HELD AS UNDER: 'IN OUR OPINION SINCE THE ASSESSEE DID NOT DEBIT TH E 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 ASSE SSEE IS FOLLOWING THE ITA NOS.300 & 301/BANG/2019 KEN CONSULTING PVT. LTD., BANGALORE PAGE 9 OF 10 MERCANTILE SYSTEM OF ACCOUNTING, THE QUESTION OF DI SALLOWING THE DEDUCTION NOT CLAIMED WOULD NOT ARISE'. 6.9 THE PRINCIPLES LAID DOWN BY THE HON'BLE DELHI H IGH COURT IN THE ABOVE CASE, ARE SQUARELY APPLICABLE TO THE CASE ON HAND. THEREF ORE, WE ARE NOT INCLINED TO UPHOLD THE FINDING OF THE AUTHORITIES BELOW. 13. THE DECISION RENDERED BY THE COORDINATE BANG ALORE BENCH IN THE CASE OF N R KUMARASWAMY (SUPRA) AND BY THE AHME DABAD BENCH IN THE CASE OF SDCE PROJECTS (P) LTD (SUPRA) COVERS THE PRESENT ISSUE IN FAVOUR OF THE ASSESSEE. WE HAVE N OTICED THAT THE BANGALORE BENCH HAS FOLLOWED THE DECISION RENDERED BY HONBLE BOMBAY HIGH COURT IN THE CASE OF KNIGHT & FRANK (IN DIA)(P) LTD (SUPRA) AND THE AHMEDABAD BENCH HAS FOLLOWED THE DE CISION RENDERED BY HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. NOBLE & HEWITT (I) (P) LTD (SUPRA). ACCORDINGLY, FOLLOWING THE ABOVE SAID DECISIONS, WE HOLD THAT THE OUTSTANDING SERVICE TAX LIABILITY IS NOT LIABLE TO BE ADDED U/S 43B OF THE ACT, SINCE THE SA ME HAS NOT BEEN CLAIMED AS DEDUCTION. ACCORDINGLY, WE SET ASIDE TH E ORDER PASSED BY LD CIT(A) AND DIRECT THE AO TO DELETE THE IMPUGN ED ADDITION. 14. IN THE RESULT, THE APPEAL FILED IN ITA NO.30 1/BANG/2019 IS ALLOWED AND THE OTHER APPEAL IS DISMISSED AS INFRUC TUOUS. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH JUNE, 2021 SD/- (BEENA PILLAI) JUDICIAL MEMBER SD/- (B.R. BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED 15 TH JUNE, 2021. VG/SPS ITA NOS.300 & 301/BANG/2019 KEN CONSULTING PVT. LTD., BANGALORE PAGE 10 OF 10 COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.
