Disallowance U/s 43B

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CA. VIKAS GUPTA (Querist)
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19 May 2009 Hi
As all aer aware that service tax is payable after amount is received. One of my client has raised a bill to the customer in the month of March-09 and liablity for service tax is credited in books. If the payment for the same will not be received till the end of september i.e. last date for filing ROI, no service tax will be deposited to government. Will the same be disallowed U/s 43B on account of non deposit of service tax on or before due date of ROI.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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19 May 2009 No ,since service tax is not routed through P & L A/C.

taxindiaconnect

taxindiaconnect (Expert)
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19 May 2009 I do not agree with my friend BC on this point. Though service tax in not routed through P & L Account, still this is statutory liability with in the meaning of section 43B. The service tax for which payment liability has been crystallised will have to be deposited before filing of ITR. The amount of statutory liability to the extent of outstanding amount will be added back to the taxable income of the assessee. Though in in this case the liability to pay service tax has not yet crystallized as the payment of the bill has not been received. For this reasons the Liability taken to payable account but not crystallised, can not be added back. Had the service tax been routed through P & L Account, in that case the disallowance would have been there.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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19 May 2009 I answered the query based on the following case decision.

Citation:- CIT Vs. Noble & Hewitt (I)Private Ltd (2008) 166 Taxmann 48(Del).

Held that since assessee did not debit the S.T amount to p &l a/c as an expenditure nor they had claimed any deduction and considering that assessee were following mercantile system of accounting, the question of disallowing the deduction not claimed would not arise.