Section 43B doesn’t apply to service tax not routed through P&L

ACIT Vs S & A Finman Ltd. (ITAT Delhi)

Introduction: This article delves into the recent decision of the Income Tax Appellate Tribunal (ITAT) Delhi in the case of ACIT vs. S & A Finman Ltd. for the assessment year 2012-13. The appeal by the Revenue challenges the order of the ld. CIT (Appeals)-14, New Delhi dated 09.12.2016, focusing on the disallowance of service tax amounting to Rs.1,79,91,058/-. The central question revolves around the application of section 43B of the Income-tax Act, 1961, and the legal implications of unpaid service tax.

Detailed Analysis:

1. Grounds of Appeal: The Revenue questions the justification behind deleting the addition of Rs.1,79,91,058/- made by the AO under section 438 of the Income-tax Act, 1961. The primary argument is that the unpaid service tax, collected from clients but not deposited to the Service Tax Department, should be treated as income irrespective of its routing through the Profit & Loss Account.

2. AO’s Rationale: The AO, in the original assessment, invoked section 43B, asserting that the unpaid service tax should be disallowed as the assessee failed to provide evidence of payment by the due date of filing the income tax return. Additionally, penalty proceedings under section 271(1)(c) were initiated.

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