An assessee being a company has rent income as business income . Now it is required to bear service tax . Now whether such service tax paid shall be allowed or disallowed as business expense and under which section ?
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Service tax query
Replies (1)
Dear Gautam,
Service tax is an indirect leavy and the ultimate receiver is required to bear the service tax. There are two ways to account it -
1. Rout it through Current liabilities - Create a liability when you receive the Servcie tax. In this case, Rent will be accounted at net of servcie tax. Hence question of deduction does not arise.
2. Just gross up the rental Income with servcie tax and claim it as a deduction. This is an allowable deduction since it is not a direct tax on income.
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