Ecoenergy Insights Limited Vs ACIT (ITAT Delhi)
Conclusion: IGST refund on export of services was not claimed as expenditure in P&L and couldn’t be treated as income merely because it was disclosed in Form 3CD. CIT(A) erred in treating the refund as hit by section 43B, since IGST on export of services was not a liability but only an advance refundable under GST law.
Held: Assessee-company was traded in electric security equipment systems and filed its income return declaring NIL income after setting off unabsorbed depreciation. The case was processed under section 143(1), assessing total income at INR 7,24,56,285 treating IGST refund reported in Clause 16(b) of Form 3CD (Tax Audit Report) as income. Assessee’s rectification request was rejected, and it appealed to CIT(A). CIT(A) partly allowed the appeal by confirming the IGST refund adjustment but allowed the set off of unabsorbed depreciation. Assessee then appealed to Tribunal. Assessee explained in the show-cause notice and again in a rectification application under section 154 that Tax Auditor had reported in Clause 16(b) of Form 3CD, which lists amounts not credited to the Profit & Loss Account. CPC treated the GST refund of INR 7,36,09,571 as income, though it was never recorded as such in the accounts. It was held that assessee had not claimed IGST payment as expenditure in P&L. Refund of IGST was merely a return of advance; hence not taxable income. Clause 16(b) reporting in the Tax Audit Report did not automatically make such refund taxable. CIT(A) erred in treating the refund as hit by section 43B, since IGST on export of services was not a liability but only an advance refundable under GST law. Therefore, addition made by CPC and upheld by CIT(A) was unjustified.
