Deduction on Account of ‘Input VAT Reverse’ is allowable u/s 43B: ITAT Kolkata [Read Order]

The Kolkata bench of the Income Tax Appellate Tribunal, in a recent decision held that the assessee is entitled to get deduction in respect of “Input Tax Reverse” under section 43B of the Income Tax Act, 1961 despite the fact that the assessee has maintained separate VAT & CST accounts and any payment made.

The sole grievance of the assessee, in the instant case was that, the Assessing Officer has made addition in respect of the VAT payment made to the Sales Tax Department on account of tax on assessment made by the sales tax authorities by alleging that the appellant maintained separate VAT & CST accounts and any payment made subsequently is not allowable as deduction even on payment basis. Further, the Commissioner of Income Tax (Appeals) also confirmed the impugned order on an appeal preferred by the assessee. Being aggrieved, the assessee has approached the Income Tax Appellate Tribunal for relief.

The Tribunal found that, a similar issue was earlier brought before the Tribunal by the same assessee for the AY 2008-09. In the earlier case, the Tribunal decided in favour of the assessee by holding that the assessee is entitled for deduction in respect of “Input Tax Reverse” as per section 43B of the Act. The Tribunal, while allowing deduction, pointed out that “the method of accounting followed by the assessee to maintain a separate VAT account to make al l credit and debit entries relating to VAT therein is not relevant to decide the allowability of the amount in question paid by the assessee on account of reversal of Input VAT Credit, inasmuch as the wrong claim of credit for inputs in the earlier years had resulted in short payment of CST/VAT payable by the assessee and the same having been paid during the year under consideration, the assessee, in my opinion, was entitled for deduction of such tax on payment basis under section 43B.”

Following the above observations, the Tribunal allowed the assessee’s claim for deduction on account of “Input VAT Reverse” and thereby, set aside the impugned Orders.

Read the full text of the order below.