Case Law Details
Col. D. Pradeep Kumar Vs DCIT (ITAT Chennai)
Introduction: The appeal of Col. D. Pradeep Kumar against the order of the Commissioner of Income Tax (Appeals)-2, Chennai, for AY 2012-13 revolves around the disallowance of Service Tax payable under section 43B of the Income Tax Act. The ITAT Chennai scrutinized the exclusive method employed by the assessee to account for Service Tax liabilities and directed the Assessing Officer (AO) to verify the extent of the liability at year-end.
Detailed Analysis: The primary issue in this case pertains to the disallowance of Service Tax payable by the assessee under section 43B. The AO disallowed a sum of Rs. 89.18 Lacs, as the assessee had only paid a portion of the Service Tax before the due date of filing the income tax return.
During the appellant proceedings, the assessee contended that since the Service Tax amount was not routed through the Profit & Loss Account, no disallowance under section 43B could be made. The assessee relied on the decision of the Hon’ble Delhi High Court in Noble & Hewitt (I) (P) Ltd (2008; 166 taxman 48).
The ITAT Chennai considered the exclusive method employed by the assessee to account for Service Tax liabilities. However, it also acknowledged that as per the extant Service Tax Rules, the liabilities arise on a receipt basis. Service Tax is payable only when the consideration is received. Therefore, the liability to pay Service Tax at year-end might not have actually arisen.
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