1. The revenue is aggrieved by an order dated 17-11-2006 passed by the Income Tax Appellate Tribunal (‘Tribunal’), Delhi Bench “D”, New Delhi in ITA No. 2910/Delhi/2004 relevant for the assessment year 1999-2000.
2. The assessed maintains a mercantile system of accounting. It had collected service tax during the previous year relevant to the assessment year in question. Out of the service tax so collected the assessed had deposited part of the amount but an amount of Rs. 14.40 lakhs was not deposited by the assessed with the concerned authorities. The assessed did not claim any deduction in this regard nor did it debit the amount as an expenditure in the Profit & Loss Account. The assessing officer as well as the Commissioner (Appeals) (‘Commissioner (Appeals)’) nevertheless disallowed the amount and added it back to the income of the assessed.
3. The Commissioner (Appeals) was of the view that the assessed had not followed the correct accounting procedure. If it had done so, the amount would have had to be debited to Profit & Loss Account and thereafter the assessed could claim a deduction thereon. The Commissioner relied upon decision of the Calcutta High Court in Chowringhee Sales Bureau (P) Ltd. v. CIT .
4. In appeal, the Tribunal was of the opinion that in view of the provisions of Section 43B of the Income Tax Act, 1961 (‘Act’), since the assessed had not claimed a deduction there was no question of disallowing the deduction which was not even claimed. The relevant extract of Section 43B of the Act reads as follows:
Certain deductions to be only on actual payment.Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of
(a) any sum payable by the assessed by way of tax, duty, cess or fee, by whatever name called, under any law for the time being in force,
(b) to (f) ** ** ** shall be allowed (irrespective of the previous year in which the liability to pay such sum was incurred by the assessed according to the method of accounting regularly employed by him) only in computing the income referred to in Section 28 of that previous year in which such sum is actually paid by him.
5. Learned Counsel for the revenue urges that the decision of the Calcutta High court in Chowringhee Sales Bureau (P.) Ltd. ‘s case (supra) covers the point in its favor. We are unable to agree. In that case it was held that the liability to pay sales tax arose the moment a sale or purchase was effected and if an assessed was maintaining accounts on the mercantile system it would be entitled to deduction of the estimated liability of sales tax, even though such sales tax had not been paid to the sales tax authorities. The question there concerned was the entitlement of the assessed to deduction under Sections 10(1)and 10(2)(xv) of the Indian Income Tax Act, 1922.The decision is clearly distinguishable in its application to the present case. Here we are concerned with an assesse who has not even claimed any deduction on the ground of service tax and has not debited the amount to its Profit & Loss Account. Moreover the provisions of Section 43B of the Act are quite clear in this regard. The decision of the Calcutta High Court in Chowringhee Sales Bureau (P) Ltd. s case (supra) was not in the context of the applicability of Section 43B of the Act.
6. In our opinion since the assessed did not debit the amount to the Profit & Loss Account as an expenditure nor did the assessed claim any deduction in respect of the amount and considering that the assessed is following the mercantile system of accounting, the question of disallowing the deduction not claimed would not arise.
7. Learned Counsel for the revenue submits that the assessed has sought to evade tax under the mercantile system of accounting. We are of the view that it is not for the revenue authorities to tell the assessed how to maintain its accounts.
8. We cannot find any fault in the view taken by the Tribunal and find no merit in this appeal
9. No substantial question of law arises.
10.The appeal is dismissed.