Prasha Solutions (P) Ltd., Delhi V. ITO, New Delhi

ITA 6726/DEL/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3384 (ITAT-DELHI)
• Duration Of Justice: 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-04-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 27-03-2017
• Assessment Year: 2013-2014
• Appeal Filed On: 30-12-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: BEDOBANI CHAUDHURI
• Section: 43B; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC NEW DELHI BEFORE SHRI B.P. JAIN, ACCOUNTANT MEMBER ITA NO.6726/DEL/2016 ASSESSMENT YEAR 2013-14 PRASHA SOLUTIONS (P) LTD. C/O KAPIL GOEL ADV. F-26/124, SECTOR-7, ROHINI DELHI. PAN: AACCP 1679F VS. ITO, WARD-20(1), NEW DELHI.. (APPELLANT) (RESPONDENT) REVENUE BY : S/SHRI KAPIL GOEL AND MUKUL GUPTA, ADV., ASSESSEE(S) BY : MS. BEDOBANI CHAUDHURI, SR.D.R. / DATE OF HEARING : 27/03/2017 / DATE OF PRONOUNCEMENT: 06/04/2017 ORDER THIS APPEAL OF THE ASSESSEE ARISES FROM THE ORDER O F LEARNED CIT(A)- VII, NEW DELHI VIDE ORDER DATED 24.10.2016 FOR THE ASSESSMENT YEAR 2013- 14. 2. THE ASSESSEE IS A PRIVATE LIMITED COMPANY AND HA S FILED A RETURN DECLARING AN INCOME OF RS.9,26,340/-. THE CASE OF T HE ASSESSEE WAS SELECTED FOR SCRUTINY BY ISSUANCE OF NOTICE UNDER S ECTION 143(2) OF THE ACT. DURING THE COURSE OF ASSESSMENT, THE AO HAD AS KED THE ASSESSEE TO GIVE PROOF OF PAYMENT OF SERVICE TAX AMOUNT OF RS. 19,26,375/- TO THE GOVERNMENT FOR THE PURPOSES OF DEDUCTION UNDER SECT ION 43B OF THE ACT. SINCE, NO PROOF OF PAYMENT OF THIS AMOUNT WAS PROVI DED, THE AO WAS OF ITA NO.6726/DEL/2016 2 THE OPINION THAT THE AMOUNT OUGHT TO HAVE BEEN CRED ITED IN THE P & L ACCOUNT, AND THEREFORE, AN ADDITION OF RS.19,26,375 /- WAS MADE IN THE HANDS OF THE ASSESSEE VIDE ASSESSMENT ORDER DATED 1 8.02.20L6. 3. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) AND VIDE IMPUGNED ORDER DATED 24.10.2016 THE CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE BY FOLLOWING HIS OWN ORD ER IN THE CASE OF THE ASSESSEE ITSELF FOR A.Y. 2011-12. 4. THE ASSESSEE IS IN APPEAL BEFORE ME AND HAS RAIS ED THE FOLLOWING GROUNDS OF APPEAL: 1. THE ADDITION OF RS.19,26,375/- WAS MADE ON ACCO UNT OF NON-DEPOSIT OF SERVICE TAX UNDER SECTION 43B OF THE INCOME TAX ACT, 1961. LD. CIT(A) HAS ERRED IN SUSTAINING THE SERVICE TAX U/S.43B OF THE INCOME TAX ACT, 1961 BY NOT CONSIDERING THE FACT THAT THE SUM WAS NOT DEBITED TO THE PROFIT AND LOSS ACCOUNT. IN OTHER WORDS, NO EXPENSES CLAIMED ON ACCOUNT OF SERVICE TAX. 2. THAT LD. CIT(A) WHILE SUSTAINING THE SOLE ADDITI ON OF RS.19,26,375/- IGNORED AL THE ARGUMENTS AND PRECEDENTS RELIED ALTHOUGH REPRODUCED IN IMPUGNED ORDER. 5. THE LD. AR ASSAILING THE ORDERS PASSED BY THE CI T(A) SUBMITS THAT THE NATURE OF SERVICE TAX HAS BEEN MISUNDERSTOOD BY THE DEPARTMENT AND SERVICE TAX DOES NOT FORM PART OF THE ASSESSABLE RE CEIPTS UNDER THE INCOME TAX. HE FURTHER SUBMITS THAT THE INVOCATION OF SECTION 145A BY THE AO WAS MISCONCEIVED. THE PRINCIPAL ARGUMENT OF THE ASSESSEE IS THAT ONCE THE ASSESSEE HAS NOT CHOSEN TO INCLUDE THE SER VICE TAX IN THE P & L ACCOUNT AND THE SAME BEING A BALANCE SHEET ITEM, TH E DISALLOWANCE UNDER SECTION 43B CANNOT BE MADE. 6. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE O RDER PASSED BY THE AO. AND THE CIT(A). ITA NO.6726/DEL/2016 3 7. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE JUDGMENTS RELIED U PO N B Y T H E LD. AR. GROUNDS NO.1 AND 2 PERTAIN TO THE ADDITIO N OF RS . 19 , 26 , 375/ - ON ACCOUNT OF NON DEPOSIT OF SERVICE TAX UNDER SECT ION 43B OF THE ACT. SECTION 43B OF THE ACT IS EXTRACTED HER EIN BELOW: 43B. NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTH ER PROVISION OF THIS ACT, A DEDUCTION OTHERWISE ALLOWABLE UNDER THIS ACT IN RES PECT OF (A) ANY SUM PAYABLE BY THE ASSE BY WAY OF TAX, DUTY, CE SS OR FEE, BY WHATEVER NAME CALLED, UNDER ANY LAW FOR THE TIME BEING IN FORCE, OR (B) ANY SUM PAYABLE BY THE ASSESSEE AS AN EMPLOYER BY W AY OF CONTRIBUTION TO ANY PROVIDENT FUND OR SUPERANNUATION FUND OR GRATUITY F UND OR ANY OTHER FUND FOR THE WELFARE OF EMPLOYEES [OR] (C) ANY SUM REFERRED TO IN CLAUSE (II) OF SUB-SECTION ( 1) OF SECTION 36. [OR] (D) ANY SUM PAYABLE BY THE ASSESSEE AS INTEREST ON ANY LOAN OR BORROWING FROM ANY PUBLIC FINANCIAL INSTITUTION [OR A STATE FINANCIAL CORPORATION OR A STATE INDUSTRIAL INVESTMENT CORPORATION], IN ACCORDANCE WITH THE TER MS AND CONDITIONS OF THE AGREEMENT GOVERNING SUCH LOAN OR BORROWING. [OR] (E) ANY SUM PAYABLE BY THE ASSESSEE AS INTEREST ON ANY [LOAN OR ADVANCES] FROM A SCHEDULED BANK IN ACCORDANCE WITH THE TERMS AND CON DITIONS OF THE AGREEMENT GOVERNING SUCH LOAN [OR ADVANCES], [OR] (F) ANY SUM PAYABLE BY THE ASSESSEE AS AN EMPLOYER IN L IEU OF ANY LEAVE AT THE CREDIT OF HIS EMPLOYEE. SHALL BE ALLOWED 9IRRESPECTIVE OF THE PREVIOUS YEAR IN WHICH THE LIABILITY TO PAY SUCH SUM WAS INCURRED BY THE ASSESSEE ACCORDING TO THE M ETHOD OF ACCOUNTING REGULARLY EMPLOYED BY HIM) ONLY IN COMPUTING THE INCOME REFER RED TO IN SECTION 28 OF THAT PREVIOUS YEAR IN WHICH SUCH SUM IS ACTUALLY PAID BY HIM. 8. A BARE PERUSAL OF THE AFORESAID SECTION MAKES IT EVIDENT THAT DEDUCTION OF ANY TAX , DUTY, CESS OR FEE IS ALLOWABLE ONLY WHEN SUCH SUM I S ACTUALLY PA I D BY THE ASSESSEE. ADMITTEDLY , IN THE PRESENT CASE THE SERVICE TAX COMPONENT OF RS . 19,26,375/- IS NOT INCLUDED IN THE P&L ACCOUNT BY T HE ASSESSEE . THE SAME INDICATES THAT THE ASSESSEE HAS CLAIMED DE DUCTION OF THE SAID AMOUNT. IT IS NOT DENIED BY THE LD. AR THA T THE SERVICE TAX COMPONENT WAS NOT PAID TO THE GOVERNMENT BY THE ASS ESSEE DURING THE YEAR. BY ADOPTING SUCH A METHOD OF ACCOUNTING, THE ASSESSEE IS ABLE TO WITHHOLD THE SERVICE TAX COMPONENT AND AT THE SAME TIME CLAIM ITA NO.6726/DEL/2016 4 DEDUCTION OF THE SAID TAX COMPONENT IN ITS P&L ACCO UNT . THE PURPOSE OF INTRODUCTION OF SECTION 43B WOULD BE RENDERED OTIOS E IF THE ARGUMENT OF THE LD. AR IS ACCEPTED. THE JUDGMENT RELIED UPON BY THE LD. AR IN THE CASE OF CIT VS. KNIGHT FRANK (INDIA) PVT. LTD., ITA NO. 247/2014 IS NOT ON THE ISSUE DECIDED ABOVE. IN VIEW THEREOF, GROUNDS N O. 2 AND 3 RAISED BY THE ASSESSEE ARE DISMISSED . 9. IN THE RESULT, THE APPEA L OF THE ASSESSEE I S DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY 06 TH APRIL, 2017 SD/- (B.P. JAIN) ACCOUNTANT MEMBER DATED: 06/04/2017 PRABHAT KUMAR KESARWANI, SR.P.S. COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT AS SISTANT REGISTRAR