Case Law Details
Infinite Water Solutions Pvt. Ltd. Vs CPC (ITAT Mumbai)
Introduction: The recent verdict by the Income Tax Appellate Tribunal (ITAT) Mumbai in the case of Infinite Water Solutions Pvt. Ltd. vs. CPC addresses the issue of non-inclusion of GST on sales in the profit and loss account. This article provides an in-depth analysis of the case, examining the grounds of appeal, relevant legal provisions, and the tribunal’s decision.
Detailed Analysis: In the appeal filed against the order of the Ld. CIT (A), NFAC, dated 20.07.2023, the assessee contested the addition made by the CPC on account of non-inclusion of GST on sales in the profit and loss account for the assessment year 2021-22.
The crux of the matter lies in Section 145A of the Income Tax Act, which mandates the adjustment of the valuation of purchase and sale of goods or services to include any tax, duty, cess, or fee incurred by the assessee. Additionally, Income Computation and Disclosure Standards (ICDS) necessitate the reporting of the net effect on income due to the application of ICDS in the tax audit report.
Upon reviewing the provisions of Section 145A and relevant notifications and circulars, the ITAT Mumbai concluded that the enhancement of the value of sales without corresponding adjustments to purchases was erroneous. The tribunal emphasized that considering GST in sales should result in a tax-neutral exercise, necessitating adjustments in opening stock, purchases, and closing stock.
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