The Bangalore bench of the Income Tax Appellate Tribunal (ITAT) has held that the amount of service tax collected but not remitted to the Government exchequer can be disallowed under section 43B of the Income Tax Act, 1961.
The department held that the assessee has not collected above service tax and only on collection, it should be payable to the Government exchequer. The Assessing Officer completed assessment relying on the various decisions including Bombay High Court in the case of CIT Vs. Ovira Logistics P. Ltd wherein it was held that the service tax has not been shown as expenditure in the P&L A/c while computing income of the assessee.
The assessee pleaded that it has not been actually verified by the AO and without examining, the AO took a decision that it has been collected and same was confirmed by the CIT(A) in the ex-parte order.
The bench comprising Shri Chandra Poojari, AM & Smt. Beena Pillai, JM observed that “In our opinion, when the assessee collected the amount, it should not kept it with them and same should be deposited to the Government exchequer within the specified date and time.”
“At this point of time, we have to see whether the assessee has actually collected service tax and kept it with him, without remitting the same to the Government exchequer. The AO recorded the finding that the assessee has actually collected the service tax from it customer and not remitted to the Government exchequer,” the Tribunal said.
Remitting the matter back to the Assessing Officer, the Tribunal held that “Accordingly, we remit this issue to the file of AO to examine whether the assessee actually collected and received the amount and kept with him without depositing to Government exchequer. If the assessee actually received from its customers and kept it without depositing the same within due date of filing of return of income u/s.139(1) of the Act, then only the AO has to invoke the provisions of Section 43B and bring that amount to tax. Ordered accordingly
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