DCIT (OSD ) 8(1), MUMBAI V. CARGOCARE LOGISTICS (I) P. LTD, MUMBAI

ITA 5993/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100936 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2015
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 10-10-2013
• Court: TRIBUNAL
• Department Lawyers: UDAY BHASKAR JAKKE
• Keywords: Question of law
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER I.T.A. NO. 5993/M/2013 (AY: 2010 - 2011 ) DY. COMMISSIONER OF INCOME TAX (OSD), RANGE - 8(1), MUMBAI. / VS. M/S. CARGOCARE LOGISTICS (I) PVT LTD, B - 1, 316 BOOMERANG, 3 RD FLOOR, OFF SAKI VIHAR ROAD, CHANDIVALI FARMS ROAD, SAKI NAKA, ANDHERI (E), MUMBAI - 400 072. ./ PAN : AAACP1996R ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI UDAY BHASKAR JAKKE, DR / RESPONDENT BY : SHRI VIJAY MEHTA / DATE OF HEARING : 14 .07.2015 / DATE OF PRONOUNCEMENT : 31 .08.2015 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE REVENUE ON 10.10.2013 IS AGAINST THE ORDER OF THE CIT (A) - 16, MUMBAI DATED 10.7.2013 FOR THE ASSESSMENT YEAR 2010 - 2011. IN THIS APPEAL, REVENUE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN DELETING THE ADDITION U/S 43B OF THE ACT OF RS. 20,09,662/ - BEING THE AMOUNT OF UNPAID SERVICE TAX, WITHOUT APPRECIATING THE FINDINGS OF THE ASSESSING OFFICER. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN DELETING THE ADDITION U/S 43B OF THE IT ACT OF RS. 20,09,662/ - BEING THE AMOUNT OF UNPAID SERVICE TAX, WITHOUT APPRECIATING THE FACT THAT THE EXCLUSIVE METHOD OF ACCOUNTING ADOPTED BY THE ASSESSEE WAS TO CIRCUMVENT ATTRACTING THE PROVISIONS OF SECTION 43B OF THE ACT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN DELETING THE ADDITION U/S 43B OF THE ACT, RELYING ON THE DECISION OF THE HONBLE ITAT, MUMBAI IN THE CASE OF PHARMA SEARCH VS. ACIT (2012) 053 SOT 0001, WITHOUT APPRECIATING THAT THE FACTS OF THE CASE IN PHARMA SEARCH ARE DIFFERENT FROM THE FACTS OF THE CASE OF THE ASSESSEE. 2. THE ISSUE RAISED IN THE ABOVE GROUNDS RELATES TO THE ADDITION OF RS. 20,09,662/ - BEING THE AMOUNT OF UNPAID SERVICE TAX, WHEN THE SERVICE TAX CHARGEABLE IS NOT ON GOODS BUT ON THE SERVICES. THE PROVISIONS OF SECTION 145A OF THE ACT 2 REFER TO GOODS ONLY AND NOT THE SERVICES. THE ASSESSEE RENDE RS THE SERVICES OF C & F AGENCY. 3. ASSESSEE FOLLOWS EXCLUSIVE METHOD OF ACCOUNTING I N A C C O U N T I N G O F S E R V I C E T A X AND THEREFORE, THE SERVICE TAX COLLECTIONS AND PAYMENTS TO THE GOVERNMENT ARE NOT CREDITED AND DEBITED THE P & L ACCOUNT RESPECTIVELY. IN THE ASSESSMENT, AO ADDED THE ABOV E SUM OF RS. 20,09,662/ - OUT OF THE SAID EXCLUSIVELY MAINTAINED SERVICE TAX ACCOUNT. HE HELD THAT THE PROVISIONS OF SECTION 145A OF THE ACT ARE APPLICABLE TO THE SERVICES OF THE ASSESSEE. HOWEVER, IN THE APPELLATE PROCEEDINGS, FIRST APPELLATE AUTHORITY RELIED ON THE ORDER OF THE TRIBUNAL IN THE CASE OF PHARMA SEARCH VS. ACIT (53 SOT 1) (MUM) AND DELETED THE ADDITION. CIT (A) ANALYSED THE SAID PROVISIONS OF SECTION 145A OF THE ACT IN PARA 3 AND ITS SUB - PARAS AND HELD THAT THEY ARE NOT APPLICABLE TO THE SERVICES. ACCORDINGLY, CIT (A) DELETED THE ADDITION MADE BY THE AO. AGGRIEVED WITH THE SAID DECISION OF THE CIT (A), REVENUE IS IN APPEAL BEFORE THE TRIBUNAL BY RAISING THE ABOVE MENTIONED GROUNDS. 4. DURING THE PROCEEDINGS BEFORE US, LD COUNSEL FOR THE ASSESSEE NARRATED THE ABOVE MENTIONED FACTS AND RELIED ON THE ORDER OF THE CIT (A) AND REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES. 5. ON THE OTHER HAND, LD DR FOR THE REVENUE RELIED ON THE ORDER OF THE AO. 6. WE HAVE HEARD BOTH THE PARTI ES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE RELEVANT MATERIAL PLACED ON RECORD. AFTER HEARING BOTH THE PARTIES, WE FIND IT RELEVANT TO EXTRACT THE FOLLOWING FROM THE ORDER OF THE CIT (A) AND THE SAME READ AS FOLLOWS: - .........THEREFORE, THE AO HAS ERRED IN LAW AND ON FACTS IN APPLYING PROVISIONS OF SECTION 145A OF THE ACT WHILE MAKING DISALLOWANCE U/S 43B OF THE ACT. IN THIS RESPECT, THE AR RELIED ON THE ORDER OF THE TRIBUNAL, MUMBAI BENCH, IN THE CASE OF PHARMA SEARC H VS. ACIT (53 SOT 1). THAT IN SECTION 145A OF THE ACT, THE WORDS USED ARE PURCHASE AND SALE OF GOODS AND INVENTORY AND THE WORD SERVICES IS CONSPICUOUSLY ABSENT. THIS CLEARLY BRINGS OUT THE INTENTION OF THE LEGISLATURE THAT REVENUE EARNED BY AN ASSE SSEE THROUGH RENDERING OF SERVICES IS NOT TO BE BROUGHT INTO THE RIGORS OF METHOD OF ACCOUNTING ADOPTED EVEN THOUGH SUCH SERVICES MAY HAVE BEEN COVERED TO FURTHER LEVY OF TAX SUCH AS SERVICE TAX. THIS WOULD BE MORE EVIDENT ON PERUSAL OF PROVISIONS OF SECT ION 80IA(8). PRIOR TO 01/04/2002 THE WORD SERVICE WAS NOT USED IN SECTION 80IA(8). HOWEVER, LEGISLATURE INTENDED TO COVER SERVICES TOO AN D ACCORDINGLY MADE AFORESAID AMENDMENTS. THIS MAKES ABUNDANTLY CLEAR THAT GOODS ARE DISTINCT FROM AND DOES NOT INCLUDE SERVICES AND WHEREVER THE LEGISLATURE INTENDED TO COVER SERVICES, IT HAS EXPRESSLY PROVIDED SO IN THE ACT. SINCE SECTION 145A DOES NOT USE THE WORD SERVICES, THE MANDATE TO VARY METHOD OF ACCOUNTING TO VALUE SALES, PURCHASE AND GOODS TO BRI NG IT TO THE PLACE OF ITS LOCATION AND CONDITION AS ON THE DATE OF VALUATION DOES NOT EXTEND TO COVER SERVICES ALSO. AS SUCH, PROVISIONS OF SECTION 145A CANNOT BE INVOKED IN THE 3 CASE OF THE APPELLANT AND THE SERVICE TAX CANNOT BE TREATED AS PART OF ITS REVENUE EARNED ON ACCOUNT OF AGENCY CHARGES AND OTHER SOURCES. IN VIEW OF THE ABOVE, THE AR SUBMITTED THAT SINCE THE ADDITION OF RS. 20,09,662/ - IS NOT IN ACCORDANCE WITH THE PROVISIONS OF SECTION 43B AS WELL AS SECTION 145A OF THE ACT , THE SAME BE HELD AS BAD IN LAW. 7. FURTHER, WE HAVE PERUSED THE ORDER OF THE TRIBUNAL IN THE CASE OF PH A RMA SEARCH (SUPRA)AND THE SAME IS RELEVANT FOR THE FOLLOWING PROPOSITION: - .......WHETHER RIGOR OF SECTION 43B MIGHT BE APPLICABLE TO CASE OF SALES - TAX OR EXCISE DU TY BUT SAME COLD NOT BE SAID TO BE POSITION IN CASE OF SERVICE - TAX BECAUSE OF T WO REASONS, FIRSTLY, A SERVICE PROVIDER IS NEVER ALLOWED IS NEVER ALLOWED DEDUCTION ON ACCOUNT OF SERVICE TAX WHICH IS COLLECTED BY IT ON BEHALF OF GOVERNMENT AND IS PAID TO GOVERNMENT ACCOUNT ACCORDINGLY AND SECONDLY, LIABILITY ARISES TO MAKE PAYMENT ONLY AFTER SERVICE PROVIDER HAS RECEIVED PAYMENTS AND IF THE RE IS NO LIABILITY TO MAKE PAYMENT TO CREDIT OF CENTRAL GOVERNMENT BECAUSE OF NON - RECEIPT OF PAYMENTS FROM RECEIVER OF SERVICES, IT CANNOT BE SAID THAT SUCH SERVICE TAX HAS BECOME PAYABLE IN TERMS OF CLAUSE (A) OF SECTION 43B BECAUSE THAT CLAUSE SPECIFICAL LY MENTIONS SUM PAYABLE BY ASSESSEE HELD YES WHETHER, THEREFORE, IF LIABILITY TO PAY SERVICE TAX DOES NOT EXIST, SERVICE TAX CANNOT BE SAID TO BE PAYABLE AND THEREFORE, PROVISIONS OF SECTION 43B COULD NOT ALSO BE INVOKED. HELD, YES [IN FAVOUR OF T HE ASSESSEE]. 8. FURTHER, WE HAVE ALSO PERUSED THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. OVIRA LOGISTICS PVT LTD IN INCOME TAX APPEAL NO.1023 OF 2013, DATED 17 TH APRIL, 2015 AND FIND THE ABOVE PROPOSITION HAS ATTAINED THE FINALITY. LATER PART OF PARA 8 OF THE SAID JUDGMENT IS RELEVANT AND THE SAME IS EXTRACTED AS FOLLOWS: - 8.......ACCORDINGLY, IN PHARMA SEARCH (SUPRA) THE TRIBUNAL GRANTED THE RELIEF TO THE ASSES SEE. WE MAKE A MENTION OF THE SAME IN THE VIEW OF THE FACT THAT THE ORDER OF THE TRIBUNAL IN M/S. PHARMA SEARCH (SUPRA) CAME TO BE CHALLENGED IN THIS COURT IN INCOME TAX APPEAL NO.370 / 2013 WHEREIN THE ONLY QUESTION OF LAW THAT WAS ADMITTED WAS RELATING TO THE KEYMAN INSURANCE POLICY. THE ASPECT OF LIABILITY TO PAY SERVICE TAX BEFORE THE SAME WAS ACTUALLY RECEIVED BY THE ASSESSEE WAS NOT ADMITTED IN ACCORDANCE WITH LAW. 9. HAVING PERUSED THE AFORESAID DECISIONS, WE ARE CLEARLY OF THE VIEW THAT SECTION 43 B DOES NOT CONTEMPLATE LIABILITY TO PAY THE SERVICE TAX BEFORE ACTUAL RECEIPT OF THE FUNDS IN THE ACCOUNT OF THE ASSESSEE. IN OUR VIEW, LIABILITY TO PAY SERVICE TAX INTO THE TREASURY WILL ARISE ONLY UPON THE ASSESSEE RECEIVING THE FUNDS AND NOT OTHERWISE. ACCORDINGLY, WHEN SERVICES ARE RENDERED, THE LIABILITY TO PAY THE SERVICE TAX IN RESPECT OF THE CONSIDERATION PAYABLE WILL ARISE ONLY UPON THE RECEIPT OF SUCH CONSIDERATION AND NOT OTHERWISE. 9. THE ORDER OF THE TRIBUNAL IN THE CASE OF PHARMA SEARCH (SUPRA) IS ALSO RELEVANT FOR THE PROPOSITION THAT THE PROVISIONS OF SECTION 145A OF THE ACT APPLY TO THE GOODS AND NOT TO THE SERVICES. PARA 8 OF THE SAID ORDER OF THE TRIBUNAL IS RELEVANT AND THE RELEVANT PART FROM THE SAID PARA READ AS UNDER: 8. THE ASSESSING OFFICER OPINED THAT, AS PER SECTION 145A OF THE INCOME TAX ACT, 1961, TAXES AND DUTIES SHOULD FORM PART OF THE GROSS RECEIPTS. APPLICATION OF SECTION 145A IS RESTRICTED TO PURCHASE AND SALE OF GOODS ONLY, AND DOES NOT EXTEND TO SERVICE CONTR ACTS. THUS, APPLICATION OF SAID SECTION IS COMPLETELY MISPLACED IN THE CASE UNDER CONSIDERATION....... 4 ............. ............ IT IS CLEAR FROM THE ABOVE PROVISIONS THAT IT APPLIES ONLY IN RESPECT OF VALUATION OF PURCHASE AND SALE OF GOODS AND INVENTOR Y AND NOT TO SERVICE CONTRACTS. THEREFORE, THE ACTION OF THE ASSESSING OFFICER IN INVOKING PROVISIONS OF SECTION 145A OF THE ACT AND ADDING SERVICE TAX TO GROSS RECEIPTS IS INCORRECT INASMUCH AS AGAINST THE VERY BASIC PRINCIPLES OF SECTION 145A. 10. CO NSIDERING THE ABOVE, WE ARE OF THE OPINION THAT THE PROVISIONS OF SECTION 145A OF THE ACT ARE NOT APPLICABLE TO THE SERVICES AS IN THE CASE HERE. FURTHER, HAVING NOT DEBITED THE SERVICE TAX BY THE ASSESSEE TO THE P & L ACCOUNT, THERE IS NO QUESTION OF INV OKING THE PROVISIONS OF SECTION 43B OF THE ACT. THEREFORE, IN OUR OPINION, THE CIT (A) HAS RIGHTLY ADJUDICATED THE ISSUE UNDER CONSIDERATION. THUS, THE ORDER OF THE CIT (A) IS FAIR AND REASONABLE AND DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED I N THE OPEN COURT ON 3 1 S T AUGUST, 2015. S D / - S D / - (AMIT SHUKLA) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 3 1 .8 .2015 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI