Selvel Advertising Pvt. Ltd. Vs CIT (ITAT Kolkata)
The appeals related to Assessment Year 2008–09 and arose from revision proceedings initiated under Section 263 of the Income Tax Act, 1961. The Commissioner had held that the assessment order passed under Section 143(3) was erroneous and prejudicial to the interest of Revenue on two grounds: (i) non-disallowance of outstanding service tax under Section 43B amounting to Rs.1,37,15,804/-, and (ii) allowance of 100% depreciation on hoarding structures.
Regarding service tax, the assessee contended that it acted merely as an agent for collection and remittance of service tax and did not claim any deduction in its profit and loss account. The liability to pay service tax arose only upon receipt of payment for services under Rule 6 of the Service Tax Rules. Since the relevant amounts had not been realized during the year, no liability crystallized. It was also submitted that Section 145A applies only to valuation of purchase and sale of goods and inventory, not to service contracts. The Tribunal held that Section 43B applies only where deduction is otherwise allowable and payable. As service tax was neither claimed as deduction nor payable due to non-receipt of income, disallowance was not warranted. Reliance was placed on judicial precedents, including decisions holding that service tax collected but not claimed as expenditure cannot be disallowed under Section 43B.
