By TIOL News Service

NEW DELHI, MAY 09, 2018: THE ISSUE BEFORE THE TRIBUNAL IS - Whether seperate accounting for service tax receipts, will absolve the assessee from his liability to pay service tax within due dates as stipulated u/s 43B(a) of I-T Act as well as provisions of Service Tax Act. NO IS THE ANSWER.

Facts of the case:

The assessee company, engaged in the building and construction industries, had returned income for the relevant AY. During the course of its scrutiny assessment, the AO noted that assessee had received service tax to the tune of Rs.1,16,09,924/-, out of which the assessee had deposited only a sum of Rs.30,83,457/- before filing its return, as was evident from the audit reports. Accordingly, the assessee was asked to submit reasons as to why service tax as claimed payable should not be treated as assessee's income. Not satisfied with the assessee's explanation, the AO disallowed the service tax payable of Rs.85,26,467/- and added the same back to assessee's income. On appeal, the CIT(A) upheld the action of AO.

Tribunal held that,

++ the assessee has recorded his turnover after deducting the service tax received and the service tax has been credited separately. It is clear that the assessee has to pay service tax within due date as set out under the provisions either by way of cash/cheque or by way of availing CENVAT credit as per Rules, but the assessee did not do so. The liability of service tax had also arisen as per the point of Taxation Rules;

++ the assessee has credit balance of service tax payable of Rs.1,16,09,924/- which was to be paid upto Mar 31, 2013 by the assessee, but he did not pay. Further, the assessee had paid a sum of Rs.30,83,457/- before filing of its return. As per Sec. 43B(a), the said outstanding payment was to be paid upto the date of filing of return. As per method of accounting, the assessee has also not included the service tax received by him in the turnover. In fact, the assessee was legally obliged to declare its turnover inclusive of service tax received. The assessee cannot be exonerated from its liability by saying that he accounted for the service tax received separately. Since the assessee did not pay service tax as contemplated u/s 43B(a) and as per provisions of Service Tax Act within the stipulated time, therefore, the CIT(A) has rightly disallowed the same u/s 43B;

++ the case laws relied by the assessee are based on different footings as in all the decisions it was held that Service Tax was not at all payable because the service tax was not received from the customer. The law prevailing at that particular time was that Service Tax was to be paid to the Government only when Service Tax is received from the service receiver to the service provider. Subsequently, there is change in the law which provides that Service Tax is to be deposited by the service provider even if service tax is not paid by the service receiver to the service provider. Therefore, in all those decisions it was held that service tax outstanding is hit by the provisions of Sec. 43B. Due to the change in the law, those decisions does not help the assessee. Moreover, the assessee has filed the service tax returns belatedly. In view of all these facts, the CIT(A) has rightly dealt with the issue in question by giving elaborate findings in the impugned order regarding confirmation of addition u/s 43B.

(See 2018-TIOL-686-ITAT-DEL)