ITAT Deletes IGST Refund Addition Holding Refundable Advance Not Taxable u/s 43B [Read Order]
The CIT(A) had treated the refund as income under section 43B, but the ITAT observed that the amount was a refundable deposit, not an expenditure.
ITAT - IGST - Refundable - TAXSCAN
ITAT - IGST - Refundable - TAXSCAN
The Delhi Bench of Income Tax Appellate Tribunal ( ITAT ) deleted the Integrated Goods and Service Tax (IGST) refund addition, holding that the refundable advance of INR 7,36,09,571 was not taxable under section 43B of Income TaxAct,1961.
Ecoenergy Insights Limited,appellant-assessee,traded in electric security equipment systems and filed its income return for the year on 15.03.2022, declaring NIL income after setting off unabsorbed depreciation. The case was processed under section 143(1), assessing total income at INR 7,24,56,285.
The assessee’s rectification request was rejected, and it appealed to the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A), in an order dated 25.09.2024, partly allowed the appeal by confirming the IGST refund adjustment reported in the tax audit under clause 16(b) of Form 3CD, but allowed the set off of unabsorbed depreciation. The assessee then appealed to the tribunal.
The assessee counsel submitted that the assessee, being an exporter of services, deposited IGST with the Government at the time of billing, which was later refunded after providing export documents. This IGST was never claimed as an expense and was shown in the balance sheet as an advance under “balance with Government authorities.”
The Tax Auditor had reported this in Clause 16(b) of Form 3CD, which lists amounts not credited to the Profit & Loss Account. The CPC treated the GST refund of INR 7,36,09,571 as income, though it was never recorded as such in the accounts.
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The assessee explained this in response to the show-cause notice and again in a rectification application under section 154, but the CPC rejected it. The CIT(A) confirmed the addition, treating it as a payment under section 43B.The counsel argued that the addition was incorrect and requested its deletion.
The Department counsel supported the lower authorities but suggested the matter could be sent back to the AO for verification of the assessee’s claim.
The two member bench comprising Satbeer Singh Godara (Judicial Member) and Manish Agarwal (Accountant Member) noted that the assessee had not claimed IGST paid on export of services as an expense, as it was an advance payment refundable after submission of export documents.
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The refund of INR 7,36,09,571/- was reported by the Tax Auditor but not treated as income. The assessee clarified that IGST paid was recorded as deposits and refunded amounts were adjusted against these deposits.
The tribunal held that the CIT(A) erred in treating this as an attempt to avoid disallowance under section 43B, as the advance IGST was refundable and not an expenditure. The tribunal directed the AO to delete the addition and allowed all grounds of appeal.
Accordingly the appeal was allowed.
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