M/s UCP Integrated Marketing Solutions (P) Ltd., New Delhi V. ITO, New Delhi

ITA 3081/DEL/2011

• Counselvise Citation: 308120114 RSA 2011
• Duration Of Justice: 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2008-2009
• Appeal Filed On: 10-06-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR B R R KUMAR
• Assessee Lawyers: SUSHIL AGARWAL
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH H NEW DELHI) BEFORE SMT, DIVA SINGH, JUDICIAL MEMBER AND SHRI B.K. HALDAR, ACCOUNTANT MEMBER I.T.A. NO.3081/DEL/2009 ASSESSMENT YEAR : 2008-09 UCP INTEGRATED MARKETING ITO, SOLUTIONS (P) LTD. D-160, BASEMENT, WARD-18 (2), SAKET, NEW DELHI. V. NEW DELHI. (APPELLANT) (RESPONDENT) PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO.AACU AACU AACU AACU- -- -4743 4743 4743 4743- -- -K KK K APPELLANT BY : SHRI SUSHIL AGARWAL, C.A. RESPONDENT BY : DR. B.R.R. KUMAR, SR. DR. ORDER PER B.K. HALDAR, AM: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORD ER OF LD CIT(A)-XXI, NEW DELHI DATED 10.5.2011 FOR ASSESSMENT YE AR 2008-09. THE ASSESSEE HAS TAKEN FOLLOWING GROUNDS OF APPEALS:- 1. THAT UNDER THE GIVEN FACTS AND CIRCUMSTANCES AND IN LA W, THE ASSESSING OFFICER GROSSLY ERRED IN ADDING SERVICE TAX PAYA BLE AMOUNTING TO `.8,44,438/- U/S 43B OF THE INCOME TAX ACT, 1961. 2. THE ASSESSEE APPELLANT CRAVES LEAVE TO ADD, AMEND, MODIF Y ALTER OR DELETE ANY GROUND OF APPEAL ON OR BEFORE THE HEA RING OF THE APPEAL. ITA NO3081/DEL/11 2 2. THE ONLY ISSUE INVOLVED IN THIS APPEAL IS AS TO WHETH ER SERVICE TAX PAYABLE AMOUNTING TO `.8,44,438/- WAS DISALLOWABLE U/ S 43B OF THE ACT. THE ASSESSEE COMPANY DISCLOSED A SUM OF `.39,73,854/- AS EX PENSES PAYABLE IN ITS BALANCE SHEET. OUT OF THE ABOVE, A SUM OF `.12,20,706/- WAS SHOWN AS PAYABLE TOWARDS SERVICE TAX OUT OF WHICH `. 3,76,268/- WAS PAID BEFORE FILING THE RETURN OF INCOME. THUS, TH E BALANCE UN-PAID AMOUNT OF SERVICE TAX WAS `.8,44,438/-. WHEN ASKED BY THE ASSESSING OFFICER AS TO WHY THE ABOVE AMOUNT SHOULD NOT BE DISA LLOWED AS PER PROVISIONS OF SECTION 43B OF THE ACT. IT WAS SUBMITTED BY THE ASSESSEE THAT SERVICE TAX IS PAYABLE ON RECEIPT BASIS. HOWEVER, AS THE ASSESSEE MAINTAINED ITS BOOKS OF ACCOUNTS ON MERCANTILE SYSTEM, T HE ABOVE CONTENTION OF THE ASSESSEE WAS NOT ACCEPTED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER FURTHER RELIED ON THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT V. SHAH CONSTRUC TION CO. LTD., REPORTED IN 230 ITR 51. THUS, AN AMOUNT OF `.8,44,43 8/- WAS ADDED BACK TO THE INCOME OF THE ASSESSEE U/S 43B OF THE ACT. 3. ON APPEAL BEFORE THE LD CIT(A), THE ASSESSEE FILED D ETAILED SUBMISSIONS WHICH HAS BEEN REPRODUCED BY THE LD CIT(A) I N PARA NO.4.1. OF HIS ORDER. IN THE SAID SUBMISSION, IT WAS POIN TED OUT BY THE ASSESSEE THAT THE CASE OF SHAH CONSTRUCTION CO. LTD. (SU PRA) WAS WITH REFERENCE TO SERVICE CHARGES AND NOT SERVICE TAX. RELI ANCE WAS ALSO PLACED ON THE HON'BLE JURISDICTIONAL HIGH COURTS JUD GMENT IN THE CASE OF CIT V. NOBEL HEWITT INDIA (P) LTD. REPORTED IN 3 05 ITR 324 IN SUPPORT OF ITS CASE. 4. LD CIT(A), HOWEVER, DID NOT ACCEPT THE CONTENTIO N OF THE ASSESSEE AND CONFIRMED THE DISALLOWANCE OF `.8,44,438/- U/S 43B OF THE ACT. AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE THE T RIBUNAL. ITA NO3081/DEL/11 3 5. BEFORE US, LD AR FOR THE ASSESSEE REITERATED THE SUBMI SSIONS MADE BEFORE THE AUTHORITIES BELOW. IT WAS FURTHER SUBM ITTED BY HIM THAT AS PER RULE 6 OF SERVICE TAX RULES, 1994, SERVICE TAX WAS PAYABLE ON AMOUNT RECEIVED BY THE ASSESSEE. THUS, THE AMOUNT THA T WAS RECEIVABLE WAS NOT REQUIRED TO BE PAID. 6. LD DR, ON THE OTHER HAND, EMPHASIZED THAT THE EXP RESSION RECEIVED HAS TO BE CONSTRUED AS PER THE METHOD OF AC COUNTING FOLLOWED BY THE ASSESSEE. AS THE ASSESSEE WAS FOLLOWING MERC ANTILE METHOD OF ACCOUNTING, AS SOON AS AN INVOICE WAS RAISED C HARGING SERVICE TAX, SUCH SERVICE TAX WAS RECEIVED BY THE ASSESSEE . THUS, IT WAS CONTENDED THAT THE ORDER OF THE LD CIT(A) MAY PL EASE BE CONFIRMED ON THIS ISSUE. 7. ON A QUERY FROM THE BENCH, THE LD AR HAD CLARIFI ED THAT THE SERVICE TAX COMPONENTS OF THE BILLS RAISED WERE NOT SHOW N BY THE ASSESSEE IN ITS GROSS RECEIPTS. THE SERVICE TAX COMPONENT W AS ACCOUNTED FOR SEPARATELY. 8. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD. WE HAVE ALSO GONE THROUGH THE CASE LAWS CITED BY BOTH THE PARTIES. WE ARE OF THE CONSIDERED OPINION THAT THE EXPRESSION RECEIVED INCL UDE RECEIVABLE AS THE ASSESSEE IS FOLLOWING MERCANTILE METHOD OF ACCOUNT ING. AS SUCH AS A COMPANY IT WAS OBLIGATORY FOR IT TO FOLLOW MERCA NTILE METHOD OF ACCOUNTING. RULE 6 OF SERVICE TAX RULES, 1994 DOES NO T HELP THE ASSESSEE IN THIS REGARD. AS THE ASSESSEE DID NOT TAKE THE SERV ICE TAX COMPONENTS AS ITS GROSS RECEIPTS, IN EFFECT IT HAS CLAIMED DEDUCTION OF THE IMPUGNED AMOUNT FROM ITS PROFIT. THE RATIO LAID DOWN BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF NOBL E HEWITT INDIA (P) LTD. (SUPRA) IS NOT APPLICABLE IN THE FACTS OF THE PRE SENT CASE. THUS, THE IMPUGNED AMOUNT WAS CLEARLY DISALLOWABLE AS PER THE PR OVISIONS OF ITA NO3081/DEL/11 4 SECTION 43B OF THE ACT. WE, THEREFORE, CONFIRM THE C ONCURRENT FINDING OF THE LOWER AUTHORITIES ON THIS ISSUE AND REJECT THE GRO UND RAISED BY THE ASSESSEE. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISM ISSED. 10. ORDER PRONOUNCED IN THE OPEN COURT ON THE 26TH DAY OF AUGUST,2011. SD/- SD/- (DIVA SINGH) (B.K. HALD AR) JUDICIAL MEMBER ACCOUNTANT MEMBER DT. 26.8.2011. HMS COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). DATE OF HEARING 18.8.2011 DATE OF DICTATION 19.8.2011 DATE OF ORDER SIGNED BY THE HON'BLE MEMBER. .8.2011 DATE OF ORDER SENT TO THE CONCERNED BENCH .8.2011 ITA NO3081/DEL/11 5