Addl. CIT, New Delhi V. M/s. SBI Cards & Payments Services Pvt. Ltd., New Delhi

ITA 4705/DEL/2016

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5175 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 8 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-05-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2011-2012
• Appeal Filed On: 02-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S RANA
• Assessee Lawyers: TUSHAR JARWAL SH RAHUL SATEEJA
• Section: 43B; 68

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL, DELHI BENCH G, NEW DELHI BEFORE : SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NO. 4703 TO 4705/DEL/2016 ASSESSMENT YEAR: 2009-10 TO 2011-12 ADDL. CIT, SPECIAL RANGE - 8, NEW DELHI. (APPELLANT) VS. SBI CARDS & PAYMENTS SERVICES PVT. LTD., 401-402, 4 TH FLOOR, AGGARWAL MILLENNIUM TOWER, NEW DELHI (PAN: AAECS5981K) (RESPONDENT) APPELLANT BY SH. S.S. RANA, CIT/DR RESPONDENT BY SH. TUSHAR JARWAL, ADVOCATE SH. RAHUL SATEEJA, ADVOCATE ORDER PER L.P. SAHU, A.M.: ALL THESE APPEALS ARE DIRECTED BY THE REVENUE AGAI NST THE ORDERS OF THE LD. CIT(A)-28, NEW DELHI DATED 14.06.2016 FOR THE ASSES SMENT YEARS 2009-10 TO 2011-12 RESPECTIVELY. SINCE THE SOLITARY ISSUE INVO LVED IN ALL THESE APPEALS PERTAINS TO DISALLOWANCE OF SERVICE TAX PAYABLE U/S . 43B OF THE ACT, ALL THESE APPEALS ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER. WE FIRST TAKE UP THE APPEAL FOR A.Y. 2009-10, THE DECISION ON WHICH SHAL L EQUALLY APPLY TO OTHER TWO APPEALS OF THE REVENUE. 2. THE SOLITARY GROUND RAISED IN APPEAL FOR A.Y. 20 09-10 READS AS UNDER : DATE OF HEARING 16.05.2019 DATE OF PRONOUNCEMENT 28.05.2019 ITA NOS. 4703 TO 4705/DEL/2016 2 1. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS. 41,55,10,732/- MADE BY THE AO ON ACCOUNT OF SERVICE TAX PAYABLE U/S 43B OF THE I.T. ACT, 1961 BY HOLDING THAT THE ASSESSEE NEITHER DEBITED THE AMOUNT TO THE P&L ACCOUNT AS AN EXPENDITURE NOR CLAIMED ANY DEDUCTION IN RESPECT OF SAID AMOUNT. ON THE CONTRARY THE AO HAD HELD THAT THE TREATMENT FOLLOWE D BY THE ASSESSEE OF NOT ROUTING SERVICE TAX THROUGH THE P&L ACCOUNT WILL NO T ALTER THE LIABILITY U/S 43B OF THE I.T. ACT, 1961'. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FILED RETURN OF INCOME ON 29.09.2009 DECLARING LOSS OF RS.261,33,60,065/-. TH E CASE WAS SELECTED FOR SCRUTINY AND STATUTORY NOTICES WERE ISSUED TO THE A SSESSEE. IN THE ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT IN THE TAX AUDIT R EPORT AT CLAUSE 21(I) IT IS STATED AS UNDER : AS PER PROVISIONS OF SERVICE TAX, THE LIABILITY TO PAY SERVICE TAX ARISES ONLY AT THE POINT OF TIME WHEN CUSTOMER PAYS FOR THE SERVIC E. HENCE, RS.41,55,10,732/- REPRESENTING THE AMOUNT OF SERVICE TAX PAYABLE AS PER BOOKS IN RESPECT OF CUSTOMER DEBTS OUTSTANDING HAS BEEN REGARD BY THE ASSESSEE AS NOT BEING COVERED UNDER SECTION 43B SIN CE IT DOES REPRESENT LIABILITY INCURRED. 4. THE ASSESSING OFFICER NOTICED THAT THERE WAS NO ANY DOCUMENTARY EVIDENCE THAT THE ASSESSEE HAS RECOVERED THE AMOUNT OF SERVI CE TAX FROM RECIPIENT OF THE SERVICES. THE ASSESSEE HAD MAINTAINED A SEPARATE LE DGER ACCOUNT IN WHICH HE ENTERS THE SERVICE TAX WHEN HE RECEIVED AND PAID TO THE CENTRAL GOVERNMENT ON PARTICULAR DATE. THE ASSESSEE HAD ALSO MAINTAINED R UNNING ACCOUNT OF THE CUSTOMERS. THE ASSESSING OFFICER ALSO NOTED THAT TH E CONTENTION OF THE ASSESSEE IS ITA NOS. 4703 TO 4705/DEL/2016 3 NOT ACCEPTABLE DUE TO THE ASSESSEE WAS UNABLE TO EX PLAIN WHETHER THE PAYMENT OF SERVICE TAX WAS RECEIVED FROM THE CUSTOMERS OR NOT. HE ALSO NOTED THAT THE SERVICE TAX CHARGE IF NOT ROUTED THROUGH THE PROFIT AND LOS S ACCOUNT, WOULD NOT ALTER THE LIABILITY U/S. 43B. THE ASSESSING OFFICER ALSO OBSE RVED THAT MERELY BECAUSE THE SERVICE TAX WAS NOT ROUTED THROUGH THE PROFIT AND L OSS ACCOUNT, THE EXPENDITURE WOULD NOT BE CONSIDERED TO HAVE BEEN CLAIMED. ACCOR DINGLY, HE MADE ADDITION OF RS.41,55,10,732/-. AGGRIEVED FROM THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE APPEALED BEFORE THE LD. CIT(A) AND MADE DETAILED WR ITTEN SUBMISSIONS ALSO. THE LD.CIT(A), AFTER CONSIDERING THE RELEVANT RULES OF SERVICE TAX AND CASE LAWS RELIED Y THE ASSESSEE, ALLOWED THE APPEAL OF THE ASSESSEE. A GGRIEVED BY THE IMPUGNED ORDER, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL . 5. THE LD. DR SUBMITTED THAT THE SERVICE TAX LIABIL ITY NOT DISCHARGED INTO THE PROFIT AND LOSS ACOUNT BY THE ASSESSEE IS HIT BY TH E PROVISIONS OF SECTION 43B OF THE ACT. ACCORDINGLY, THE AMOUNT OF SERVICE TAX WHICH H AS NOT BEEN PAID AS PER SECTION 43B IS NOT ALLOWABLE. HE ALSO SUBMITTED THAT EVEN I F THE ASSESSEE HAS NOT SHOWN THE SERVICE TAX IN PROFIT AND LOSS ACCOUNT, THE ASS ESSEE HAD SHOWN THE LIABILITY THEREOF DIRECTLY IN THE BALANCE SHEET. HE RELIED ON THE JUDGMENT OF TRIBUNAL IN THE CASE OF HEMKUNT INFRA TECH (ITA NO. 6683/DEL/2013. 6. THE LD. AR, ON THE OTHER HAND, REITERATED THE SU BMISSIONS MADE BEFORE THE LD.CIT(A) AND SUBMITTED THAT THE CASE OF THE ASSESS EE IS COVERED IN HIS FAVOUR BY THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CA SE OF NOBLE AND HEWITT (INDIA) P. LTD. (2008) 166 TAXMAN 48 (DELHI) AND THE DECISION OF BOMBAY HIGH COURT IN PCIT ITA NOS. 4703 TO 4705/DEL/2016 4 VS. TOP SECURITY LTD. (2018) 97 TAXMANN.COM 525(BOM BAY), THE SLP AGAINST WHICH STOOD DISMISSED BY HONBLE SUPREME COURT. 7. WE HAVE HEARD THE SUBMISSIONS OF BOTH THE PARTIE S AND HAVE GONE THROUGH THE ENTIRE MATERIAL AVAILABLE ON RECORD AND WE FIND THAT THE LD. CIT(A) HAS ALLOWED THE APPEAL OF THE ASSESSEE AFTER RECORDING DETAILED FINDINGS WHICH READ AS UNDER : 7.1 I HAVE CAREFULLY CONSIDERED THE FACT OF THE C ASE ,FINDING OF THE A.O AND THE SUBMISSION OF THE L.D AR .SERVICE TAX A CENTRAL TAX THAT WAS INTRODUCED BY MAKING PROVISIONS IN CHAPTER V OF THE FINANCE ACT 1 994 (SECTION 64 TO SECTION 96). THE ACT PROVIDES THE METHOD OF LEVY, THE CIRCUM STANCES IN WHICH THE LEVY WOULD ARISE, INTER ALIA, THE MANNER OF PAYMENT ETC. SECTION 68 OF THE ACT PRIOR TO ITS AMENDMENT ON 16.10.1998 ENVISAGED THAT THE P ERSON PROVIDING TAXABLE SERVICE MUST COLLECT SERVICE TAX AND THEN PAY IT TO THE GOVERNMENT ACCOUNT ONLY WHEN SUCH PERSON FAILED TO COLLECT THE TAX PER SON IS LIABLE TO PAY THE TAX. HOWEVER WITH EFFECT FROM 16.10.1998 SECTION 68 WAS AMENDED BY OMITTING THE ELEMENT OF COLLECTION AND IT PROVIDES THAT THE DU TY OF THE PAYING THE SERVICE TAX IS ON THE PERSON PROVIDING THE SERVICE IN THE P RESCRIBED MANNER. THE MANNER IS PRESCRIBED IN RULE 6 WHICH PRESCRIBES THA T THE SERVICE TAX IS REQUIRED TO BE PAID ONLY ON THE VALUE OF TAXABLE SE RVICES RECEIVED IN A PARTICULAR MONTH OR QUARTER AS THE CASE MAY BE AND NOT ON THE GROSS AMOUNT CHARGED OR BILLED TO THE CLIENT 7.2 HENCE PRIOR TO THE INTRODUCTION OF POINT OF TAX ATION RULES 2011, THE LIABILITY TO MAKE PAYMENT OF SERVICE TAX AROSE ONLY UPON RECEIPTS OF PAYMENTS FROM THE SERVICE RECIPIENTS . IF THERE IS NO LIABIL ITY TO MAKE THE PAYMENT TO THE CREDIT OF THE CENTRAL GOVERNMENT BECAUSE OF NON-REC EIPT OF PAYMENTS FROM THE RECEIVER OF THE SERVICES, THEN IT CANNOT BE SAID TH AT SUCH SERVICE TAX HAS BECOME PAYABLE IN TERMS OF CLAUSE (A) OF SECTION 43 B BECAUSE THAT CLAUSE SPECIFICALLY MENTIONS 'SUM PAYABLE BY THE ASSESSEE' . SINCE IN THE CASE UNDER CONSIDERATION THE APPELLANT HAS NOT RECEIVED THE SE RVICE TAX IN QUESTION ,THE LIABILITY TO PAY THE SAME IN THE GOVERNMENT ACCOUNT DOES NOT ARISE. FURTHER IN THE CASE UNDER CONSIDERATION NO PART OF RECEIPT OF SERVICE TAX HAS BEEN TAKEN TO THE P&L A/C . THE FACT THAT THE SERVICE TAX HAS N OT BEEN ROUTED THROUGH THE PROFIT 8S LOSS ACCOUNT HAS ALSO BEEN CERTIFIED BY T HE AUDITOR IN CLAUSE 13(A) OF ITA NOS. 4703 TO 4705/DEL/2016 5 THE TAR. HENCE , SINCE THE ASSESSEE NEITHER DEBITED THE AMOUNT TO THE P&L A/C AS AN EXPENDITURE NOR CLAIM ANY DEDUCTION IN RESPEC T OF THE SAID AMOUNT , THERE IS NO REASON FOR DISALLOWING THE AMOUNT WHICH HAS NOT BEEN CLAIMED AS DEDUCTION BY THE APPELLANT . CONSIDERING ABOVE AND RESPECTIVELY FOLLOWING THE DECISIONS CITED ABOVE THE ADDITION OF RS. 41,55,10, 732/ MADE BY THE ASSESSING OFFICER ON ACCOUNT OF SERVICE TAX PAYABLE UNDER SEC TION 43B OF THE ACT IS DELETED. 8. THE LD. CIT(A) HAS MADE GOOD REASONED ORDER, WHI CH NEEDS NO INTERFERENCE. IN FACT, THE ISSUE UNDER CONSIDERATION IS COVERED I N FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN TH E CASE OF NOBLE AND HEWITT (INDIA) P. LTD. (SUPRA) AND THE DECISION OF BOMBAY HIGH COURT IN PCIT VS. TOP SECURITY LTD. (SUPRA). THE SLP FILED BY REVENUE AGA INST THIS DECISION OF BOMBAY HIGH COURT ALSO STOOD DISMISSED BY HONBLE SUPREME COURT. THE CASE LAW RELIED BY THE LD. DR IS NOT APPLICABLE BECAUSE THE POINT O F TAXATION RULE HAS BEEN INTRODUCED FROM 2011 AND THE CASE OF THE ASSESSEE I S FOR THE ASSESSMENT YEARS PRIOR TO INTRODUCTION OF AMENDED PROVISIONS. WE, TH EREFORE, DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE LD . CIT(A). ACCORDINGLY, THE APPEAL OF THE REVENUE DESERVES TO BE DISMISSED. SINCE, THE GR OUNDS AND FACTS INVOLVED IN OTHER TWO APPEALS ARE IDENTICAL, THE APPEALS OF REV ENUE FOR A. YRS. 2010-11 AND 2011-12 ALSO FAIL. 9. IN THE RESULT, ALL THE THREE APPEALS OF THE REVE NUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28.05.2019. SD/- SD/- (AMIT SHUKLA) (L.P. S AHU) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 28.05.2019