Space Out of Home Vs ITO (ITAT Kolkata)
The appeal by Space Out of Home to the Income Tax Appellate Tribunal (ITAT), Kolkata, challenged the disallowance of Rs.19,37,607/- related to outstanding Service Tax liability for the Assessment Year 2018-19. The disallowance was initially made by the CPC, Bengaluru, while processing the return under Section 143(1) and was subsequently upheld in a rectification order under Section 154 and confirmed by the Ld. CIT(A). The core issue was the treatment of the outstanding service tax, which the CPC disallowed under the premise that it violated Section 43B of the Income Tax Act, which mandates actual payment of statutory liabilities to claim a deduction.
The assessee, an advertising business, successfully argued that the CPC’s blanket disallowance was factually incorrect and contrary to law. The assessee clarified that the reported outstanding amount of Rs.19,37,607/- was not solely related to AY 2018-19. Only Rs.2,59,216/- pertained to the relevant year, and this amount had already been deposited before the due date for filing the return, thus satisfying the requirements of Section 43B. The remaining balance of Rs.16,78,391/- was an accumulated liability from previous years and was currently under dispute in a pending appeal before the CGST authority. The assessee contended that this accumulated amount could not be disallowed under Section 43B, nor could it be treated as a cessation of liability under Section 41 while the appeal was pending. Accepting the assessee’s submission that the 2018-19 liability was paid in time and the remaining amount was under appeal, the ITAT ruled that the addition under Section 43B could not be sustained. The Tribunal set aside the CIT(A)’s order and directed the AO to delete the entire addition of Rs.19,37,607/-.
