SHRI SHRI RANVEER SINGH VIDHURI, RAIPUR V. THE DY. COMMISSIONER OF INCOME TAX,-2(1), RAIPUR (CG)

ITA 304/BIL/2016

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 6029 (ITAT-RAIPUR)
• Duration Of Justice: 5 year(s) 9 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 25-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Retrospective amendment; Question of law
• Section: 28; 43B; 139; 143(3); 143(2); 139(1); 43

Judgement Text

ITA No. 304/RPR/2016 AY: 2012-13 Ranvir Singh Vidhuri V. DCIT 1 IN THE INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH, RAIPUR BEFORE SHRI RAVISH SOOD (JUDICIAL MEMBER) AND SHRI RATHOD KAMLESH JAYANTBHAI (ACCOUNTANTMEMBER) I.T.A. No. 304/RPR/2016 (Assessment Year: 2012-13) Sh. Ranvir Singh Vidhuri, 8, Harshit Tower, Hirapur, Tatibandh, Raipur, (C.G.) PAN No. ABKPV1221D Vs. DCIT-2(1), Raipur (C.G.) (Assessee) (Revenue) Assessee by : Shri Sunil Kumar Agrawal, CA Revenue by : Shri G. N. Singh, Sr. DR Date of Hearing : 07/06/2022 Date of pronouncement: 18/07/2022 ORDER PER RAVISH SOOD, J.M: The present appeal filed by the assessee is directed against the order passed by the CIT(A)-1, Raipur, dated 29.06.2016, which in turn arises from the order passed by the A.O under Sec. 143(3) of the Income-tax Act, 1961 (for short ‘the Act’) dated 31.03.2015 for Assessment Year 2012-13. The assessee has ITA No. 304/RPR/2016 AY: 2012-13 Ranvir Singh Vidhuri V. DCIT 2 assailed the impugned order on the following grounds of appeal before us: “1. That the ld. CIT(A) has erred in law as well as on facts, in sustaining the addition of Rs. 7,16,761/- on account of disallowance made u/s 36(1)(va) r.w.s. 2(24)(x) of the IT Act towards ‘employees contribution to EPF’ made by the ld. AO. 2. That the ld. CIT(A) has erred in law as well as on facts, in sustaining addition of Rs. 54,65,666/- on account of ‘service tax collected but not paid’, by treating it as ‘business income’ of the assessee u/s 28 r.w.s 5 of the IT Act made by the ld. AO. 3. That the assessee craves leave to add, urge, alter, modify and withdraw any ground/grounds before or at the time of hearing of the appeal.” 2. Succinctly stated, the assessee who is a labour contractor had filed his return of income for AY 2012-13 on 31.03.2013, declaring an income of Rs.35,20,780/-. Case of the assessee was thereafter selected for scrutiny assessment u/s 143(2) of the Act. 3. Assessment was, thereafter, framed by the AO vide his order passed u/s 143(3), dated 31.03.2015 determining the income of the assessee at Rs. 98,53,210/- after inter-alia making the following additions/disallowances: Sr. No. Particulars Amt. (Rs.) ITA No. 304/RPR/2016 AY: 2012-13 Ranvir Singh Vidhuri V. DCIT 3 1. Disallowance u/s 36(1)(va) r.w.s 2(24)(x) of the delayed deposit of the employee’s share of contribution towards EPF. 7,16,,761/- 2. Addition of service tax not paid by the assessee within the ‘due date’ of filing of return of income. Rs. 54,65,666/- 4. Aggrieved the assessee carried the matter in appeal before the CIT (Appeals) but without any success. 5. The assessee being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us. 6. We have heard the Ld. Authorised Representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by the ld. Authorized Representative (for short ‘AR’) for the assessee to drive home his contentions. In so far the addition of the amount of delayed deposit of employees share of contribution towards EPF of Rs. 7,16,761/- is concerned, the same had been made by the AO by triggering the provisions of Sec. 36(1)(va) r.w.s. 2(24)(x) of the Act. It is the claim of the ld. AR that though the actual amount of the delayed deposit of the employees share of contribution towards EPF aggregated to Rs. 6,42,579/- but the same had wrongly been ITA No. 304/RPR/2016 AY: 2012-13 Ranvir Singh Vidhuri V. DCIT 4 taken by the AO at Rs.7,16,761/-. In order to buttress his aforesaid claim the ld. AR had placed on record the bifurcated details of delayed deposit of the employees share of contribution towards EPF a/w a reconciliation projecting various instances where certain amounts had wrongly been taken by the AO, as under: for the month Employees contribution towards EPF (Rs.) as taken by the ld AO deposited on (before 30-9-12 i.e., the due date of filing ROI u/s 139) June, 11 74,010 14,010 Rs.69,834 on 25-7-2011; Rs.4,176 on 3-10-11 July, 11 74,661 74,661 Rs. 52,257 on 5-9-11; Rs. 11,194 on 17-9-11; Rs.11,210 on 4-10-11 Aug, 11 62,988 62,988 Rs.51,598 on 27-9-11; Rs.11,390 on 7-10-11 Oct, 11 88,115 88,115 Rs. 53,035, on 2-12-11; Rs.11,390 on 7-12-11; Rs.23,690 on 23-2-12 Nov, 11 91,526 91,526 Rs.64,885 on 28-12-11; Rs.26,641 on 23-2-12 Dec, 11 93,404 38,631 Rs.11,390 on 25-1-12; Rs.54,773 on 6-2-12; Rs.27,241 on 23-2-12 Jan, 12 90,830 90,830 Rs.25,696 on 23-2-12; Rs.11,390 on 24-2-12; Rs.53,744 on 29-2-12 Feb, 12 67,045 67,045 Rs.67,045 on 29-3-12 Total 6,42,579 (correct figure) 5,27,806 (incorrect - Rs.7,16,761) ITA No. 304/RPR/2016 AY: 2012-13 Ranvir Singh Vidhuri V. DCIT 5 It was the claim of the ld. AR that though the assessee had delayed the deposit of the employees share of contribution towards EPF, i.e, beyond the specified time limit contemplated in the Employees Provident Fund Act, 1952, but had deposited the same much prior to the ‘due date’ of filing of his return of income as provided in Sec. 139(1) of the Act, therefore, no disallowance of the same could have been made under Sec. 43B of the Act. Accordingly, it was the averred by the ld. AR that as the assessee had deposited the employees share of contribution towards EPF prior to the ‘due date’ of filing of his return of income, therefore, he was saved from the disallowance of the same as per the mandate of the “Proviso” to Sec. 43B of the Act. 7. Per contra, the ld. Departmental Representative (for short ‘DR’) relied on the orders of the lower authorities. 8. Having heard the Authorized Representatives of both the parties, we are persuaded to subscribe to the contention advanced by the ld. AR that now when the employees share of contribution towards EPF had been deposited by the assessee prior to the “due date” of filing of his return of income for the year under consideration, therefore, no disallowance of the same was called ITA No. 304/RPR/2016 AY: 2012-13 Ranvir Singh Vidhuri V. DCIT 6 for in his hands. We find that the aforesaid issue in question is squarely covered by a recent order of the Tribunal in the case of M/s Ind Synergy Limited Vs. The DCIT-1(2), Raipur, ITA No. 312/RPR/2016; dated 10/03/2022 (to which one of us, the JM was a party), wherein after exhaustive deliberations it was held as under : “Adverting to the disallowance of the assessee’s claim for deduction of the employees share of contribution towards PF of Rs.2,88,976/-, we find that the same had been disallowed by the Assessing Officer u/s.2(24)(x) of the Act, for the reason that the said amount was deposited beyond the stipulated time period that was prescribed under the said Employees Welfare Fund Act. Before us, it was claimed by the Ld. AR, that now when the aforesaid amounts were deposited by the assessee before the “due date” of filing of its return of income for the year under consideration, therefore, the same were allowable as a deduction u/s.43B of the Act. It was submitted by the Ld. AR that the lower authorities had misconceived the settled position of law and disallowed the aforementioned amounts, despite the fact that the same had been deposited prior to “due date” of filing of the return of income by the assessee company. 10. In order to answer the issue as to whether or not the employees contribution to welfare funds falls within the scope and domain of Sec. 43B of the Act, we may herein draw support from the judgment of the Hon’ble High Court of Bombay in the case of CIT Vs. Hindustan Organic Chemicals Ltd in ITA No. 399/12, dated 11.07.2014. In the said case, the Hon’ble High Court of Bombay was, inter alia, called upon to answer the following substantial question of law that was raised in the appeal filed by the revenue:- “(A). Whether on the facts and in the circumstances of the case, the Hon'ble Tribunal, in law, was right in allowing the claim of the Assessee on account of delayed payments of P.F. Of employees' contribution amounting to Rs.1,82,77,138/- by relying on the decision of the Hon'ble Supreme Court in the case of CIT vs. Alom Extrusion Ltd. (319 ITR 306) ?” After referring to the amendments that were made available to Section 43B of the Act, the Hon’ble High Court answered the aforesaid question in the affirmative and upholding the order of the tribunal qua the aforesaid aspect dismissed the appeal filed by the revenue. Also, we find that a similar view had been arrived at by various Hon’ble High Courts, as under :- ITA No. 304/RPR/2016 AY: 2012-13 Ranvir Singh Vidhuri V. DCIT 7 a. CIT Vs. Amil Ltd reported (2010) 321 ITR 508 (Delhi High Court) b. CIT Vs. Hemla Embroidery Mills (P) Ltd. (2014) 366 ITR 167 (P&H) c. Bihar State Warehousing Corporation Ltd.Vs. CIT 386 ITR 410 (Patna) d. Sagun Foundary Pvt. Ltd Vs. CIT 145 DTR 265 (All) e. CIT Vs. Mark Auto Industries (2008) 358 ITR 43 (P&H) f. CIT Vs. Jaipur Vidyut Vitran Nigam Ltd (2014) 363 ITR 307 (Raj) g. Essae Teraoka Pvt. Ltd Vs. DCIT (2014)366 ITR 408 (Kar) h. CIT Vs. Vijay Shree Ltd (2014) 43 Taxmann.com 396 (Cal) i. CIT Vs. Kichha Sugar Co Ltd (2013) 356 ITR 351 (Uttarakhand) In the backdrop of the aforesaid settled position of law, we are of the considered view that no distinction is to be drawn between the employers as well as employees contribution to PF and ESI, as both are covered u/s 43B of the Act. 11. Before parting qua the aforesaid issue in hand, we think it apt to deal with the scope of applicability of the amendments that have been made available on the statue vide the Finance Act, 2021, i.e, “Explanation 5” to Section 43B and “Explanation 2” to Section 36(1)(va), i.e, as to whether those are applicable prospectively w.e.f A.Y 2021- 22 onwards, or, are to be given a retrospective effect. Issue in hand is squarely covered by the order of a coordinate bench of the tribunal, i.e, ITAT, Amritsar in the case of Vinko Auto Industries Ltd. Vs. DCIT 2021 (12) TMI 636. In its aforesaid order, the Tribunal had after drawing support from the order of the ITAT, Hyderabad Bench in the case of the Value Momentum Software Services Pvt Ltd. Vs. DCIT in ITA No. 2197/Hyd/2017, dated 19.05.2021, had observed, that the amendments in section 36(1)(va) and section 43B of the Act, vide respective explanations that had been made available on the statue by the Finance Act, 2021, are applicable only from 01.04.2021 i.e. w.e.f A.Y 2021-22 onwards. For the sake of clarity the observations of the tribunal in its aforesaid order are culled out as under:- “5.1 We may observe that the ld. CIT(A) in its order at para no. 7.15 itself has observed that the issue has been highly contentious and different High Courts have taken divergent views on the same issue, out of which some are in favour of the assessee and some are against the assessee. The ld. CIT(A) further observed that the judgments and orders relied upon by the assessee have been rendered before the clarificatory amendments made in the Finance Act, 2021 and the Finance Act, 2021 has put an end to this controversy. 5.2 Admittedly there is plethora of judgments in favour of the Assessee’s contention and of the Revenue. The controversy with regard to divergent views of different High Courts, has been settled by the Hon'ble Apex Court in the case of CIT Vs. M/s. Vegetables Products Ltd. (88 ITR 192) by laying the dictum that if two reasonable constructions of a taxing provision are possible that construction which favours the Assessee must be adopted. The Hon’ble jurisdictional High Court in the case of CIT Vs. M/s Hemla Embroidery Mills (P) Ltd. (366 ITR 167) (P&H HC) and in the case of CIT Vs. M/s Mark Auto Industries Ltd. (358 ITR 43) (P&H HC) clearly held that the assessee is entitled to claim deduction of employee’s share of ESI & PF u/s.43B of the Act, if the same has been deposited prior to the filing of return of income u/s.139(1) of the ITA No. 304/RPR/2016 AY: 2012-13 Ranvir Singh Vidhuri V. DCIT 8 Act. From the above judgments of the Hon’ble jurisdictional High Court, it is clear that the Hon’ble Court has not drawn any distinction between the employee’s and employer’s share qua PF & ESI contributions. Admittedly there are no contrary judgements of the jurisdictional High Court against the assessee on the aspect under consideration hence, first determination of the Ld. CIT(A) qua non-applicability of the provisions of Section 43B of the Act to the employee’s share qua PF & ESI, is unsustainable. 5.3 Now, coming to the second aspect/determination made by the CIT(A) to the effect that the amendment made in Section 36(1)(va) and 43B of the Act by Finance Act 2021 has to be considered as clarificatory in nature and having retrospective effects, therefore would be applicable to the previous assessment years as well. We may observe that various benches of the ITAT including Hyderabad Bench in the case of Value Momentum Software Services Pvt. Ltd. (ITA No.2197/Hyd/2017 decided on 19.05.2021), have taken into consideration the identical issue qua applicability of the amendment to Section 36(1)(va) and Section 43B of the Act, by inserting Explanations by the Finance Act, 2021 and clearly held that the amendment shall be applicable from 1st April, 2021 onwards . It is also relevant to note that the CBDT has also issued Memorandum of Explanation qua applicability of the amended provisions of Section 36(1)(va) & 43B of the Act w.e.f. 1st April, 2021, and Assessment Year 2021-21 onwards, hence there is no doubt qua applicability of the amended provisions referred above, prospectively. On the aforesaid discussion, the second aspect as considered/determined by the ld. CIT(A) qua retrospective application of the amended provisions of Section 36(1)(va) and 43B of the Act wherein Explanations have been inserted by Finance Act, 2021 qua employees’ share in respect of PF & ESI Act, is also unsustainable . 5.4 In view of the above discussions, the disallowances of Rs.5,88,203/- for A.Y.2018-2019 and Rs.60,540/- for A.Y.2019-2020 made by the A.O. and confirmed by the CIT(A) are not sustainable and, hence, the same stands deleted.” On the basis of our aforesaid deliberations, we are of the considered view, that as the amendments made available on the statue vide the Finance Act, 2021 i.e “Explanation 5” to Section 43B and “Explanation 2” to Section 36(1)(va) are applicable w.e.f 01.04.2021, i.e, from A.Y 2021-22 onwards, therefore, the same would not have any bearing on the case of the assessee before us, i.e, for A.Y 2011-12. Accordingly, drawing support from the aforementioned judicial pronouncements, we, herein conclude, that as the employees contributions to PF and ESI of Rs.2,88,976/-was deposited by the assessee before the “due date” of filing of its return of income for the year under consideration, therefore, the same being saved by the provisions of Sec. 43B of the Act could not have been disallowed by the A.O. We, thus, in the backdrop of our aforesaid deliberations set-aside the order of the CIT(A) and vacate the disallowance of Rs. 2,88,976/- made by the A.O. Thus, the Ground of appeal No. 1 is allowed in terms of our aforesaid observations.” ITA No. 304/RPR/2016 AY: 2012-13 Ranvir Singh Vidhuri V. DCIT 9 As the facts and the issue involved in the aforesaid order of the Tribunal in the case of Ind Synergy Lyd. (supra) remains the same as are there before us in the case of the present assessee, therefore, we respectfully follow the same. Accordingly, as the assessee in the case before us had deposited the employees share of contribution of EPF much prior to the “due date” of filing of his return of income as contemplated in Sec. 139(1) of the Act i.e 30.09.2012, therefore, the same as per the concession provided in “Proviso” to Sec. 43B(b) would not be liable for any disallowance. We, thus, in terms of our aforesaid observations set-aside the order of the CIT(Appeals) and direct the AO to vacate the disallowance of Rs. 7,16,761/- made in the hands of the assessee qua the delayed deposit of the employees share of contribution of EPF. The Ground of appeal No. 1 is allowed in terms of our aforesaid observations. 9. We shall now deal with the grievance of the assessee that both the lower authorities had erred in law and on the facts of the case in sustaining an addition of Rs. 54,65,666/- on account of service- tax that was collected but not paid by treating the same as his business income under Sec. 28 r.w.s 5 of the Act. Succinctly stated, it was observed by the AO that the balance sheet of the ITA No. 304/RPR/2016 AY: 2012-13 Ranvir Singh Vidhuri V. DCIT 10 assessee revealed “Service Tax Payable” of Rs. 1,53,78,341/-. It was gathered by the AO from a perusal of the service-tax register that the assessee qua the services provided by him as a labour contractor had during the year under consideration received service-tax amounting to Rs. 54,65,666/-. Although the assessee produced before the AO challans evidencing deposit of service tax of Rs.9,25,972/-, but the period for which the same were deposited was not found mentioned on the same. Backed by the aforesaid facts the AO called upon the assessee to explain that now when the service-tax had not been deposited prior to the ‘due date’ of filing of his return of income, then, why the same may not be disallowed and added to his returned income. In reply, it was submitted by the assessee that as he had not claimed any deduction for the amount of service-tax in his return of income, therefore, no disallowance of the same was called for in his hands. However, the AO was not persuaded to subscribe to the aforesaid explanation of the assessee. Observing that the assessee had though received the amount of service-tax from his customers by virtue of contract work but had not made the payment of the same to the Government account before the ‘due date’ of filing of his return of income as contemplated in Sec. 139(1) of the Act, the AO ITA No. 304/RPR/2016 AY: 2012-13 Ranvir Singh Vidhuri V. DCIT 11 held the unpaid amount of service-tax of Rs. 54,65,666/- (as was collected by the assessee during the year under consideration) as his business income under Sec. 28 r.w.s 5 of the Act. In so far the contention of the assessee that now when he had not claimed any deduction of the amount of service-tax, therefore, no disallowance of the same was called for in his hands, the same did not find favour with the AO. On appeal, the CIT(Appeals) held a conviction that the amount of service-tax ought to have formed a part of the assessee’s contract receipts and there was no justification on his part to have excluded it from the receipts and shown the same as a liability in the ‘balance sheet’. Backed by his aforesaid conviction the CIT(Appeals) was of the view that if the assessee would had credited the amount of service-tax in his contract receipts, then, the same would have increased his income, as in the absence of deposit of the same in the government account a corresponding debit of the said amount would not have been allowed to him. Accordingly, the CIT(Appeals) not finding favour with the exclusive method of accounting of contract receipts (i.e net of service-tax) that was adopted by the assessee upheld the addition /disallowance made by the AO. ITA No. 304/RPR/2016 AY: 2012-13 Ranvir Singh Vidhuri V. DCIT 12 10. Aggrieved, the assessee has assailed before us the sustaining of the addition of the amount of unpaid service-tax of Rs. 54,65,666/- (supra) by the CIT(Appeals). It is the claim of the ld. AR that as the assessee had consistently been following the exclusive method of accounting of his contract receipts (i.e net of service-tax), therefore, having not claimed any deduction for the amount of service-tax that was collected during the year under consideration no disallowance of the same could have validly been made. In sum and substance, it was the claim of the assessee that as he had not claimed any deduction of the amount of service-tax, therefore, the disallowance of the same was beyond comprehension. On the contrary it was the claim of the ld. DR that as the assessee upto the ‘due date’ of filing of his return of income had failed to deposit the amount of service-tax collected during the year in the government exchequer, therefore, the same had rightly been disallowed by the AO. 11. We have given a thoughtful consideration to the aforesaid issue in hand in the backdrop of the contentions advanced by the ld. Authorised representatives of both the parties. As observed by us hereinabove, both the lower authorities had drawn adverse ITA No. 304/RPR/2016 AY: 2012-13 Ranvir Singh Vidhuri V. DCIT 13 inferences in the hands of the assessee for the reason that he had upto the ‘due date’ of filing of his return of income as contemplated in sub-section (1) of Sec. 139 of the Act failed to deposit the amount of service-tax. Before proceeding any further we deem it fit to cull out Sec. 43B(a) (relevant extract) which had as a matter of fact been triggered by the lower authorities for making an addition/disallowance of the amount of service-tax of Rs. 54,65,666/- (supra) that was though collected by the assessee from his customers during the year but had not been deposited with the government exchequer upto the ‘due date’ of filing of his return of income, as under : “43B. Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect 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 being in force, or (b) to (f) ................................................................................................... shall be allowed (irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by him) only in computing the income referred to in section 28 of that previous year in which sum is actually paid by him. Provided that nothing contained in this section shall aply in relation to any sum which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under sub-section (1) of section 139 in respect of thre previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return.... ” Now, as claimed by the ld. AR, and rightly so, the disallowance, inter alia, of any amount of tax would be called for within the ITA No. 304/RPR/2016 AY: 2012-13 Ranvir Singh Vidhuri V. DCIT 14 meaning of Sec. 43B only where the same had been claimed as a deduction by the assessee. Admittedly, it is a matter of fact borne from record that the assessee who is consistently following the exclusive method for accounting his contract receipts (i.e net of service-tax) had not claimed any deduction of the amount of service-tax of Rs. 54,65,666/- (supra), pursuant whereto the failure on his part to pay/deposit the same upto the ‘due date’ of filing of his return of income as contemplated in sub-section (1) of Sec. 139 would not entail any disallowance in his hands. In sum and substance, now when the assessee had not claimed any deduction of the amount of service-tax of Rs. 54,65,666/- (supra) in question, therefore, the same could not have been disallowed by triggering the provisions of Sec. 43B of the Act. But then, it is the exclusive method of accounting of contract receipts (i.e net of service tax) that is consistently being followed by the assessee that has been challenged by the CIT(Appeals). In fact, the CIT(Appeals) finding fault with the exclusive method of accounting of contract receipts (i.e net of service-tax) that was being followed by the assessee had re-casted his Profit & loss a/c. After including the amount of service-tax in the amount of contract receipts, the CIT(Appeals) was of the view that as the assessee had failed to ITA No. 304/RPR/2016 AY: 2012-13 Ranvir Singh Vidhuri V. DCIT 15 deposit the aforesaid amount of tax by the ‘due date’ for filing of his return of income as provided in sub-section (1) of Sec. 139 of the Act, thus, a corresponding claim for debit of the same was not be allowed to him as per the mandate of Sec. 43B of the Act. 12. We shall now deal with the sustainability of the observation of the CIT(Appeals) that the assessee was not justified in following the exclusive method for accounting his contract receipts (i.e net of service-tax) and was obligated to follow the inclusive method and include the amount of service-tax in the contract receipts credited in his profit & loss a/c. Before proceeding any further we would herein cull out the observations of the CIT(Appeals) qua the aforesaid aspect, as under : “ 3.3 Facts being as above. I have perused the assessment order and gone through the submission of the assessee. I find that service tax received as part of sale proceeds has to be credited in Profit & loss account and then a claim has to be made on debit side as and when the tax is paid to government. Appellant cannot exclude it from the receipts and keep the amount in balance sheet as liability. Had the appellant credited amount of service tax in sales, his income would increase as he will not get debit as service tax was not paid during the year. Instead, he did accounting flat and shown it as liability without crediting to P & L account. Such a course of accounting cannot be allowed.” After having given a thoughtful consideration to the aforesaid observations of the CIT(Appeals) we are unable to persuade ourselves to subscribe to his view that the assessee was to be held at fault for accounting his contract receipts by following exclusive ITA No. 304/RPR/2016 AY: 2012-13 Ranvir Singh Vidhuri V. DCIT 16 method (i.e net of service-tax) which he had consistently been following for the last many years. For answering the aforesaid issue we shall look into the provisions of Sec. 145A of the Act (as were available on the statute during the year under consideration i.e AY 2012-3) and had impliedly been brought into play by the CIT(Appeals), as under : “Method of accounting in certain cases. 145A. Notwithstanding anything to the contrary contained in section 145, - (a). The valuation of purchase and sale of goods and inventory for the purpose of determining the income chargeable under the head “Profits and gains of business or profession” shall be – (i). In accordance with the method of accounting regularly employed by the assessee; and (ii). further adjusted to include the amount 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 location and condition as on the date of valuation. Explanation – For the purpose of this section, any tax, duty, cess or fee (by whatever name called) under any law for the time being in force, shall include all such payment notwithstanding any right arising as a consequence to such payment.” As is clearly discernible from a perusal of the aforesaid statutory provision i.e Sec. 145A of the Act, it transpires beyond doubt that Section 145A(a)(ii) during the year under consideration i.e AY 2012-13 contemplated only the valuation of purchase and sale of goods and inventory and had no bearing on valuation of services. Our aforesaid view is supported by the judgment of the Hon’ble ITA No. 304/RPR/2016 AY: 2012-13 Ranvir Singh Vidhuri V. DCIT 17 High Court of Bombay in the case of The Commissioner of Income-tax-2 vs. Knight Frank (India ) Pvt. Ltd., ITA No. 247 & 255 of 2014, dated 16.08.2016. Before the Hon’ble High Court the following question of law was, inter-alia, raised : “(i). Whether on the facts and in the circumstances of the case and in law, the Tribunal was correct in deleting the addition u/s 145A of the Income Tax Act, 1961 due to inclusion of service tax as part of trading receipts, by holding that the provisions of Section 145A of the Act are applicable to manufacturing segment of business and not to a service provider company?” Answering the aforesaid question, it was observed by the Hon’ble High Court that a perusal of Sec. 145A(a)(ii) of the Act, revealed, that the same would only cover cases where the amount of tax, duty, cess or fee is actually paid or incurred by the assessee to bring the goods to the place of its location and condition as on the date of valuation. Notably as the assessee before them was rendering services and had admittedly not paid or incurred any liability for the purpose of bringing any goods to the place of its location, it was observed by the Hon’ble High Court that as the service-tax billed neither has relation to any goods nor does it have anything to do with bringing the goods to a particular location, therefore, the provisions of Sec. 145A(a)(ii) of the Act would not be applicable to service-tax billed on rendering of services. For the ITA No. 304/RPR/2016 AY: 2012-13 Ranvir Singh Vidhuri V. DCIT 18 sake of clarity the relevant observations of the Hon’ble High Court are culled out as under : “6. Regarding question (i) :- (a). For the better appreciation of the controversy to be examined, it is necessary to reproduce Section 145A of the Act, which at the relevant time read as under :- “145A - Notwithstanding anything to the contrary contained in Section 145 - (a). the valuation of purchase and sale of goods and inventory for the purposes of determining the income chargeable under the head “Profits and gains of business or profession” shall be – (i) in accordance with the method of accounting regularly employed by the assessee; and (ii) further adjusted to include the amount 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 location and condition as on the date of valuation. Explanation - For the purposes of this section , any tax, duty, cess or fee (by whatever name called) under any law for the time being in force, shall include all such payment notwithstanding any right arising as a consequence to such payment.” (b). The grievance of the Revenue to the impugned order of the Tribunal is that Section 145A(a)(ii) of the Act would apply as the amount receivable on rendering of services would also include the service tax. This service tax is similar to excise duty, sales tax and other taxes, which have to be collected to be paid over to the Government. (c). It is very clear from the reading of Section 145A(a)(ii) of the Act that it only covers cases where the amount of tax, duty, cess or fee is actually paid or incurred by the assessee to bring the goods to the place of its location and condition as on the date of valuation. (d). In this case, the respondent-assessee has admittedly not paid or incurred any liability for the purposes of bringing any goods to the place of its location. In this case, the respondent­ assessee is rendering services. Thus, on the plain reading of Section145A(a)(ii) of the Act, it is self evident that the same would not apply to the service tax billed on rendering of services. This is so as the service tax billed has no relation to any goods nor does it have anything to do with bringing the goods to a particular location. (e). The Explanation to Section 145A(a) of the Act does not expand its scope. An Explanation normally does not widen the scope of the main section. It merely helps clarifying an ambiguity. (See Zakiyr Begam v/s. Shanaz Ali &Ors., 2010 (9) SCC 280). The main part of the Section specifically restrict its ambit only to valuation of purchase and sale of goods and ITA No. 304/RPR/2016 AY: 2012-13 Ranvir Singh Vidhuri V. DCIT 19 inventory. Rendering of service is not goods or inventory. Goods would mean movables and inventory would mean stock of goods. Therefore, the Explanation would only apply for valuation of sales and purchase of goods and stock of goods as provided in the main part. The Explanation in this case clarifies/ explains that any tax, duty, cess or fee paid or incurred will have to be taken into account for valuation of goods even if such payment results in any benefit/ right to the person making the payment. This Explanation was necessary as otherwise in terms of Accounting Standard – (AS-2) issued by the Institute of Chartered Accountants of India provides that cost of goods would include the duties and taxes paid, other then the duties and taxes which give a right to recover the same from the taxing authorities – to illustrate duty draw back etc. Thus, the Explanation only seeks to clarify the fact that notwithstanding any right acquired on payment of taxes to recover the same from the government, for the purpose of Section 145A of the Act, the same cannot be excluded even though the AS-2 provides otherwise. It does not even remotely deal with the issue of service tax. (f). Further, it is to be noted that Service Tax was first introduced in India by Finance Act, 1994. Section 145A of the Act was first introduced into the Act only by Finance (No.2) Act, 1998 w.e.f. 1st April, 1999. It was thereafter substituted by Finance (No.2) Act, 2009 which is identical, except for addition of clause (b), dealing with interest. However, the Parliament did not while substituting it, deem it fit to explicitly include the valuation of Services therein. Thus, it is clear that the legislature never intended to restrict the applicability of Section 145A of the Act only to goods and not extend it to Services. As observed by the Apex Court in State of Bihar v/s. S. K. Roy AIR 1966 (SC) 1995:- “It is well recognized principle in dealing with construction that a subsequent legislation may be looked at in order to see what is the proper interpretation to be put upon an earlier Act where the earlier Act is obscure or capable of more then one interpretation.” We must make it clear that we do not find any ambiguity in Section 145A of the Act as arising for our consideration. However, even if one were to assume the main part of Section 145A of the Act, is capable of more then one interpretation, the interpretation sought to be canvassed by the Revenue, is not sustainable. Therefore, Section 145A of the Act would have no application in cases where service is provided by the Assessee. (f) In view of the above, the question (i) as proposed does not give rise to any substantial question of law. Thus, not entertained.” (emphasis supplied by us) Further, referring to the fact that Service tax was first introduced in India by the Finance Act, 1994, but the legislature neither at the time of insertion of Sec. 145A of the Act on the statute, i.e, vide ITA No. 304/RPR/2016 AY: 2012-13 Ranvir Singh Vidhuri V. DCIT 20 the Finance (No.2) Act, 1998 w.e.f 1 st April, 1999 nor at the time of its subsequent amendment vide the Finance (No.2) Act, 2009 had on either of the occasions deemed it fit to bring the valuation of services within the sweep of Sec. 145A of the Act, it was observed by the Hon’ble High Court that the said purposive omission by the legislature clearly revealed its intention to restrict the applicability of Sec. 145A only to goods and not to extend it to services. Accordingly, it was observed by the Hon’ble High Court that Sec. 145A would have no application in cases where services were being provided by the assessee. 13. Before proceeding any further, we may herein observe that it is only through a subsequent amendment made available on the statute vide the Finance Act, 2018 (13 of 2018) w.r.e.f 01.04.2017 that the valuation of purchase and sale of services shall also be adjusted to include the amount of any tax, duty, cess or fee (by whatever name called) actually paid or incurred by the assessee to bring the services to the place of its location and condition as on the date of valuation. For the sake of clarity Sec. 145A, i.e, post amended vide the Finance Act 2018(13 of 2018) w.r.e.f 01.04.2017 is culled out as under (relevant extract) : ITA No. 304/RPR/2016 AY: 2012-13 Ranvir Singh Vidhuri V. DCIT 21 “S. 145A Method of accounting in certain cases – For the purposes of determining the income chargeable under the head “Profits and gains of business or profession”, - (i)........................................................................................................ (ii). the valuation of purchase and sale of goods or services and of inventory shall be adjusted to include the amount of any tax, duty, cess or fee (by whatever name called) actually paid or incurred by the assessee to bring the goods or services to the place of its location and condition as on the date of valuation. (iii) to (iv). ....................................................................................” On the basis of our aforesaid observations, we are of the considered view that as during the year consideration i.e AY 2012- 13 Sec. 145A(a)(ii) only contemplated valuation of purchase and sale of goods and inventory and thus covered cases where the amount of tax, duty, cess or fee was actually paid or incurred by the assessee to bring the goods to the place of its location and condition as on the date of valuation and had no bearing to rendering of services, therefore, no infirmity emerges from the accounting of the contract receipts by the assessee on the basis of exclusion method (i.e net of service-tax), which as observed by us hereinabove had consistently been followed by it since last many years. We, thus, in terms of our aforesaid observations set-aside the order of the CIT(Appeals) who had held that the accounting of the contract receipts by the assessee by adopting the exclusion method (i.e net of service-tax) was not proper. ITA No. 304/RPR/2016 AY: 2012-13 Ranvir Singh Vidhuri V. DCIT 22 14. We shall now deal with the grievance of the assessee that as he had not claimed any deduction of the amount of service-tax, therefore, there could be no justification for disallowance of the same by triggering the provisions of Sec. 43B of the Act. Before proceeding any further, we may herein observe, that as we have approved the exclusion method (i.e net of service-tax) of accounting of contract receipts by the assessee, therefore, the adjudication of the present issue, i.e, disallowance of the unpaid amount of service-tax would rest on the edifice of our said observation. As observed by us hereinabove the disallowance under Sec. 43B pre- supposes a claim of deduction by the assessee. However, as in the present case before us, as averred by the ld. AR, and rightly so, now when the assessee had not claimed any deduction for the amount of the service-tax, thus, the failure on his part to deposit the same in the government account within the stipulated time period would not entail or lead to any disallowance of the said amount. In fact, the said issue too had came up for adjudication before the Hon’ble High Court of Bombay in the case of Knight Frank (supra), wherein the following question of law was raised : “(ii). Whether on the fats and in the circumstances of the case and in law, the Tribunal was correct in consequently deleting the addition u/s 43B of the ITA No. 304/RPR/2016 AY: 2012-13 Ranvir Singh Vidhuri V. DCIT 23 Income tax Act, 1961 being unpaid service tax liability disallowed without appreciating the fact that service tax stands on the same footing as excise duty or sales tax vis-a-vis the phrase ‘any tax, duty, cess or fee (by whatever name called)’ used in Section 43B of the Income-tax Act, 1961 and allowable only on an actual payment basis.” Answering the aforesaid question, it was, inter alia, observed by the Hon’ble High Court that now when the assessee admittedly had not claimed any deduction on account of the service-tax payable in order to determine its taxable income, therefore, there could be no occasion to invoke Sec. 43B of the Act. For the sake of clarity the relevant observations of the High Court qua the aforesaid issue in hand are culled out as under : “7. Regarding question (ii) :- (a). It is an admitted position before us that the respondent assessee had not claimed any deduction on account of the service tax payable in order to determine its taxable income. In the above view, there can be no occasion to invoke Section 43B of the Act. (b). Mr. Suresh Kumar, learned Counsel for the Revenue fairly states that the issue stands concluded against the Revenue by the decisions of this Court in Commissioner of Income Tax Vs.Ovira Logistics P. Ltd. 377 ITR 129 and Commissioner of Income Tax Vs. Calibre Personnel Services Pvt. Ltd. (Income Tax Appeal No. 158 of 2013) rendered on 2nd February, 2015. (c). In view of the above, the question (ii) as proposed is covered by the decision of this Court. Therefore, it does not give rise to any substantial question of law. Thus, not entertained.” (emphasis supplied by us) We, thus, in terms of our aforesaid observations taking cognizance of the fact that the assessee had not claimed any deduction for the amount of service-tax while determining his ITA No. 304/RPR/2016 AY: 2012-13 Ranvir Singh Vidhuri V. DCIT 24 taxable income, vacate the disallowance of the same u/s 43B of the Act by the lower authorities. 15. Accordingly, in terms of our aforesaid deliberations we herein set-aside the order of the CIT(Appeals) and vacate the addition/disallowance of the unpaid amount of service-tax of Rs. 54,65,666/- (supra) so made by the AO. 16. The Ground of appeal No. 2 is allowed in terms of our aforesaid observations. 17. Resultantly, the appeal filed by the assessee is allowed in terms of our aforesaid observations. Order pronounced in the open court on 18/07/2022. Sd/- Sd/- RATHOD KAMLESH JAYANTBHAI RAVISH SOOD (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) Raipur Dated: 18.07.2022 **GP/Sr.PS* ITA No. 304/RPR/2016 AY: 2012-13 Ranvir Singh Vidhuri V. DCIT 25 Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. The CIT(A)- 4. CIT 5. DR, ITAT, Raipur 6. Guard file. BY ORDER, //True Copy// Private Secretary