Case Law Details
Real Image Media Technologies Pvt. Ltd. Vs. ACIT (ITAT Chennai)
Facts – Real Image Media Technologies Pvt Ltd (the Assessee), in their books of account, did not route the service tax dues through the profit and loss account. However, the liability towards service tax was reported in the Balance Sheet. During the course of assessment proceedings, the assessing officer (AO) requested the assessee to furnish proof in support of the payment of service tax dues on or before the statutory date for filing the return of income. The service tax amount which was not paid before the due date for filing the return of income was added to the income of the assessee.
Contentions of Assessee – In terms of the Service Tax Legislation, the duty of paying the service tax is on the person providing the service. Service tax is required to be paid only on the value of taxable services received in a particular month/quarter and not on the gross amount charged or invoiced. The assessee company maintains books of accounts on accrual basis. Therefore, the service tax payable account shows the tax payable on the gross amount billed and not the amount payable as per the amount received by the assessee company. The Company has paid the service tax on amounts realized hence no disallowance was warranted.
Held – The rigour of sec.43B may be applicable in the case of Sales-tax or Excise Duty but the same cannot be said to be the position in case of Service-tax because of two reasons. Firstly, the Assessee is never allowed deduction on account of service tax which is collected on behalf of the Govt., and paid to the Govt. accordingly. Therefore, a service provider is merely acting as an agent of the Govt., and is not entitled to claim deduction on account of service tax. Hence, on this account alone addition under sec.43B could not be made and the same has been correctly deleted by the CIT(Appeals). If there is no liability to make the payment to the credit of Central Government because of non receipt of payments from the receiver of the services, then it cannot be said that such service tax has become payable in terms of clause (a) of sec.43B because that clause specifically mentions “sum payable by the Assessee”. Since service tax was not payable by the Assessee, the rigour of sec.43B could not have been applied to the case of the Assessee.
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