Belated payment of Service Tax collected can be allowed on Actual Payment in AY in which it was Actually Paid: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Bangalore held that belated paid service tax collected to Government exchequer can be allowed on actual payment in the assessment year in which it was actually paid.

The assessee is a resident company registered under the Companies Act, 1956, following the mercantile method of accounting, carrying on the business of IT-enabled services. The assessee has filed its return of income for the assessment year 2014-2015, declaring Income at Rs. Nil.

After setting off brought forward losses of Rs.9,34,983 and paid applicable taxes of Rs.61,116 u/s 115JB of the I.T.Act. The assessee’s case was taken up for scrutiny u/s 143 and notice was issued u/s 143(2) by the assessee by the A.O.

The assessee filed the details as called for by the A.O. in response to notice u/s 143(2). Thereafter, the A.O. concluded the assessment by determining the total income at Rs.58,17,228 by disallowing service tax collected by the assessee at Rs.48,82,245 u/s 43B of the Act.

Aggrieved by the orders of the Income Tax Authorities, the assessee is in appeal before the Tribunal.

The Order was delivered by Accountant Member, Chandra Poojari on an appeal filed by M/s. Wyzmindz Solutions Private Limited.

Section 43B(a) is elaborates as under :

43B. Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of—

(a) any sum payable by the assessee by way of tax, duty, cess or fee, by whatever name called, under any law for the time being in force, or

Rule 4 of the CENVAT Credit Rules, 2004 reads as under :

Rule 4. Conditions for allowing CENVAT credit.

(1) The CENVAT credit in respect of inputs may be taken immediately on receipt of the inputs in the factory of the manufacturer or in the premises of the provider of output service.

The Authority observed that during the impugned year, the assessee has a credit balance of service tax payable as on 31.03.2013 of Rs.1,16,09,924/- which was to be paid up to 31.03.2013 by the assessee, but he did not pay.

The Income Tax Appellate Tribunal (ITAT) also observed that the assessee had paid a sum of Rs.30,83,457/- before the filing of IT return. As per section 43B(a), the above outstanding payment was to be paid up to the date of filing of return of income. Moreover, the assessee has filed the service tax returns belated, i.e., for April to June on 16.04.2015, from July to September and half-yearly from October to March 2013 on 08.07.2015.

While allowing the bench also said that, the service tax collected by the assessee and not paid to the Government exchequer before the due date of filing of return, is to be disallowed, though it was not charged to the profit and loss account and it attracts the provisions of section 43B of the Act and it should be allowed on actual payment in the assessment year in which it was actually paid.