Principal CIT Vs. Tops Security Limited (Bombay High Court)
The Assessing Officer was of the view that by virtue of Section 43B of the Income Tax Act, 1961, service tax can be allowed only when paid and therefore the amount is not liable as deduction.
On appeal Hon;ble High Court held that Section 43B does not contemplate liability to pay service tax before actual receipt of the funds in the account of the assessee. Hence the liability to pay service tax into the Treasury will arise only upon the assessee receiving the funds and not otherwise. Thus the consideration has to be actually received and thereupon the liability will arise.
FULL TEXT OF THE HIGH COURT ORDER / JUDGMENT
1. The Revenue’s appeals challenge the orders of the Income Tax Appellate Tribunal, Bench at Mumbai.
2. In all these appeals, the Revenue proposes a common question and terms it to be a qsubstantial uestion of law. The common question reads as under:”
“Whether, in law and on the facts and in the circumstances of the case, the Hon’ble ITAT was justified in holding that the service tax though debited to the profit and loss account but not credited to the Central Government cannot be disallowed under Section 43B of the Income Tax Act, 1961?”
3. The facts and circumstances in Income Tax Appeal No.733 of 2015 are sufficient for the purposes of the final order
that we propose to pass in these appeals.
