James George Mathai,, Pune v. Income-tax Officer,,

ITA 396/PUN/2014 | 2007-2008
Pronouncement Date: 31-07-2015 | Result: Partly Allowed

Appeal Details

RSA Number 39624514 RSA 2014
Assessee PAN AFGPG7929F
Bench Pune
Appeal Number ITA 396/PUN/2014
Duration Of Justice 1 year(s) 4 month(s) 27 day(s)
Appellant James George Mathai,, Pune
Respondent Income-tax Officer,,
Appeal Type Income Tax Appeal
Pronouncement Date 31-07-2015
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 31-07-2015
Date Of Final Hearing 27-07-2015
Next Hearing Date 27-07-2015
Assessment Year 2007-2008
Appeal Filed On 03-03-2014
Judgment Text
] ]] ] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A PUNE ! ' # $ BEFORE SHRI R.K. PANDA AM AND SHRI VIKAS AWASTHY JM ITA NO.396/PN/2014 ASSESSMENT YEAR : 2007-08 SHRI JAMES GEORGE MATHAI PROPRIETOR OF L.J. ELECTRICALS J.J. BHAVAN PANCHANATH COLONY KALEWADI PIMPRI PUNE 411 017. PAN: AFGPG7929F .. APPELLANT VS. INCOME TAX OFFICER WARD 8(3) PUNE. ... RESPONDENT / APPELLANT BY : SHRI SUNIL GANOO / DEPARTMENT BY : SHRI B. C. MALAKAR / DATE OF HEARING : 27.07.2015 / DATE OF PRONOUNCEMENT: 31.07.2015 % / ORDER PER R.K. PANDA AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 10.01.2014 OF CIT(A)-V PUNE RELATING TO ASSESSMENT YEAR 2007-08. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER :- 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LEARNED C.I.T.[A] HAS ERRED IN CONFIRMING THE DISAL LOWANCE OF RS.5 76 676.00 MADE BY THE LEARNED ASSESSING OFFICE R U/S 43 B OF THE I.T. ACT 1961 ON THE GROUND OF ALLEGED NON PAYMENT OF SERVICE TAX BEFORE THE DUE DATE OF FILING THE RETURN OF INCOME. THE SAID DISALLOWANCE BEING PATENTLY ILLEGAL AND BAD IN LAW THE SAME MAY PLEASE BE DELETED. WITHOUT PREJUDICE TO ABOVE AND BY WAY OF AN ALTERNA TE SUBMISSION IT IS PRAYED THAT THE SAID DISALLOWANCE MAY PLEASE BE RES TRICTED TO RS.3 21 266.00. 2. THE DISALLOWANCE OF RS.23 239.00 MADE BY THE LEA RNED ASSESSING OFFICER U/S 43B OF THE I.T. ACT 1961 AND AS CONFIRMED BY THE 2 ITA NO.396/PN/2014 LEARNED C.I.T.[A] ON THE GROUND OF ALLEGED NON PAYM ENT OF P.F. AND E.S.I.C. CONTRIBUTION WITHIN THE PRESCRIBED STATUTO RY TIME LIMIT BEING PATENTLY ILLEGAL BAD IN LAW AND DEVOID OF MERITS T HE SAME MAY PLEASE BE DELETED. 3. THE APPELLANT CRAVES THE PERMISSION TO ADD AMEN D MODIFY ALTER REVISE SUBSTITUTE DELETE ANY OR ALL GROUND S OF APPEAL IF DEEMED NECESSARY AT THE TIME OF HEARING OF THE APPEAL. 3. DURING THE COURSE OF HEARING THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE AT THE OUTSET POINTED OUT THAT SOME ERRO R HAS CREPT IN THE AFORESAID GROUND OF APPEAL NO.1 AND RS.3 21 266/- MENTIONED I N THE SAID GROUND BE SUBSTITUTED BY CORRECT FIGURE OF RS.3 44 425/-. 4. IN THIS APPEAL BOTH THE GROUNDS OF APPEAL TAKEN BY THE ASSESSEE RELATE TO DISALLOWANCE UNDER SECTION 43B OF THE ACT DUE TO DE LAY IN PAYMENT OF STATUTORY GOVERNMENT DUES. 5. AS PER THE GROUND OF APPEAL NO.1 THE ASSESSEE H AS OBJECTED TO DISALLOWANCE OF RS.5 76 676/- UNDER SECTION 43B OF THE ACT FOR NON-PAYMENT OF SERVICE TAX OUTSTANDING. THE LD. AUTHORIZED REPRES ENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS ENGAGED IN THE BUSIN ESS OF TRADING OF ELECTRICAL GOODS AND ALSO UNDERTAKES ELECTRICAL CONTRACT FOR S UPPLY OF ELECTRICAL MATERIALS. THE ASSESSEE MAINTAINS REGULAR BOOKS OF ACCOUNT FOLLOWI NG THE MERCANTILE SYSTEM OF ACCOUNTING. THE INVOICE RAISED ALONG WITH SERVICE TAX IS THUS ACCOUNTED FOR . CONSEQUENTLY SERVICE TAX OF RS.5 76 676/- IS SHOWN AS UNPAID LIABILITY IN THE BALANCE SHEET AS ON 31.03.2007 . THIS AMOUNT HAS BEEN DISALLOWED BY THE ASSESSING OFFICER ON THE GROUND THAT PAYMENT THEREO F HAS NOT BEEN MADE BEFORE DUE DATE OF FILING OF RETURN OF INCOME. THE LD. AR SUBMITTED THAT THE ASSESSEE CREDITS THE SERVICE TAX CHARGED ON BILLS AS LIABILI TY AND WHENEVER THE SERVICE TAX IS PAID THE SAME IS REDUCED FROM THE AFORESAID SERVIC E TAX LIABILITY. IT WAS CANVASSED THAT ACCORDING TO THE SCHEME OF THE SERVICE TAX A N ASSESSEE IS MERELY AN AGENT OF THE CENTRAL GOVERNMENT FOR THE COLLECTION OF TAXES FROM HIS CUSTOMERS AND ON RECEIPT OF THE SAME THE TAX IS TO BE PAID TO THE C ENTRAL GOVERNMENT WITHIN 3 ITA NO.396/PN/2014 PRESCRIBED TIME LIMIT. HE ADVERTED OUR ATTENTION T O SECTION 68 OF THE SERVICE TAX ACT WHICH PROVIDES FOR THE PAYMENT OF SERVICE TAX AT TH E RATE AND IN THE MANNER PROVIDED IN THE STATUTE. HE FURTHER REFERRED TO RU LE 6 THERETO AND EMPHASIZED THAT SERVICE TAX LIABILITY IS REQUIRED TO BE PAID TO THE CREDIT OF THE CENTRAL GOVERNMENT BY 5 TH OF THE MONTH IMMEDIATELY FOLLOWING THE CALENDAR MO NTH IN WHICH THE PAYMENTS ARE ACTUALLY RECEIVED TOWARDS THE VALUE OF TAXABLE SERVICES. THE LIABILITY OF RS.5 76 676/- HAS BEEN RECOGNIZED BY THE ASSESSEE I N THE BOOKS FOLLOWING THE MERCANTILE BASIS ON RAISING THE BILL AS A SERVICE P ROVIDER. HOWEVER THE STATUTORY LIABILITY TO PAY ARISES ONLY WHEN THE SERVICE TAX I S ACTUALLY COLLECTED. HE REFERRED TO PAGE 31 OF THE PAPER BOOK WHICH CONTAINS THE SERVIC E TAX AS PER RECEIPT BASIS ACCORDING TO WHICH THE SERVICE TAX LIABILITY ON REC EIPT BASIS WORKS-OUT TO RS.3 44 425/- ONLY WHICH HAS NOT BEEN PAID ON OR BE FORE THE DUE DATE OF FILING OF RETURN. THEREFORE THE DISALLOWANCE IF ANY CANNOT EXCEED THIS AMOUNT. HE SUBMITTED THAT PROVISION OF SECTION 43B DOES NOT CO NTEMPLATE LIABILITY TO PAY SERVICE TAX BEFORE ACTUAL RECEIPT OF THE FUNDS TO THE ACCOU NT OF THE ASSESSEE. FOR THE ABOVE PROPOSITION HE RELIED ON THE DECISION OF THE JURIS DICTIONAL HIGH COURT IN THE CASE OF CIT VS. OVIRA LOGISTICS PVT. LTD. IN INCOME TAX APP EAL NO.1023 OF 2013 ORDER DATED 17 TH APRIL 2015 . 6. ON THE OTHER HAND THE LD. DEPARTMENTAL REPRESEN TATIVE FOR THE REVENUE RELIED ON THE ORDERS OF THE AUTHORITIES BELOW IN SU PPORT OF THE CASE OF THE REVENUE. 7. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF THE A UTHORITIES BELOW FACTS AND MATERIAL PLACED BEFORE US AND ALSO THE DECISION REL IED UPON. WE FIND CONSIDERABLE FORCE IN THE ARGUMENT LED BY THE LD. AUTHORIZED REP RESENTATIVE FOR THE ASSESSEE. THE STATUTORY LIABILITY WHICH CALLS FOR DISALLOWANC E UNDER SECTION 43B OF THE ACT CAN ONLY BE THE LIABILITY WHICH IS DUE FOR PAYMENT UND ER THE RESPECTIVE STATURE BEFORE THE DUE DATE OF FILING OF RETURN. IF THE STATUTORY LIABILITY IS NOT DUE FOR PAYMENT THE SAME CANNOT BE DISALLOWED MERELY BECAUSE THE LIABIL ITY HAS BEEN RECOGNIZED IN THE BOOKS OF ACCOUNT. THE ENTRIES IN THE BOOKS OF ACCO UNT ARE NOT DECISIVE FOR INVOKING 4 ITA NO.396/PN/2014 SECTION 43B OF THE ACT. THE SCHEME FOR THE TIME LI MIT OF PAYMENT OF SERVICE TAX LIABILITY CONCERNING THE RELEVANT ASSESSMENT YEAR I S WELL LAID AS POINTED OUT BY THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE. AD MITTEDLY THE SERVICE TAX LIABILITY TO THE EXTENT OF RS.3 44 425/- ONLY HAS BEEN COLLEC TED FOR THE RELEVANT FINANCIAL YEAR FOR WHICH OBLIGATION TO DEPOSIT THE SAME TO THE GOV ERNMENT TREASURY HAS NOT BEEN DISCHARGED. THEREFORE THERE IS NO JUSTIFICATION T O DISALLOW THE ENTIRE OUTSTANDING OF RS.5 76 676/-. WE HOLD THAT THE DISALLOWANCE UNDER SECTION 43B OF THE ACT IN RESPECT OF UNPAID SERVICE TAX LIABILITY BE RESTRICT ED TO THE SUBSTITUTED FIGURE OF RS.3 44 425/- ONLY. THE DECISION OF THE HONBLE BO MBAY HIGH COURT IN THE CASE OF CIT VS. OVIRA LOGISTICS PVT. LTD. (SUPRA) RELIED UPON BY THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE CLEARLY CLINCHES TH E AFORESAID VIEW WHERE IT HAS BEEN OBSERVED AS UNDER :- 9. HAVING PERUSED THE AFORESAID DECISIONS WE ARE CLEARLY OF THE VIEW THAT SECTION 43B DOES NOT CONTEMPLATE LIABILITY TO PAY T HE SERVICE TAX BEFORE ACTUAL RECEIPT OF THE FUNDS IN THE ACCOUNT OF THE ASSESSEE . IN OUR VIEW LIABILITY TO PAY SERVICE TAX INTO THE TREASURY WILL ARISE ONLY UPON THE ASSESSEE RECEIVING THE FUNDS AND NOT OTHERWISE. ACCORDINGLY WHEN SERVICES ARE RENDERED THE LIABILITY TO PAY THE SERVICE TAX IN RESPECT OF THE CONSIDERATION PAYABLE WILL ARISE ONLY UPON THE RECEIPT OF SUCH CONSIDERATION AND NOT OTHERWISE. 8. THUS ALTERNATIVE PLEA IN GROUND OF APPEAL NO.1 RAISED BY THE ASSESSEE IS ALLOWED AND THE DISALLOWANCE IS RESTRICTED TO RS.3 44 425/- AS AGAINST RS.5 76 676/- BY THE ASSESSING OFFICER AND UPHELD BY THE CIT(A). GROUND OF APPEAL NO.1 IS ACCORDINGLY PARTLY ALLOWED. 9. THE SECOND GROUND OF THE ASSESSEES APPEAL PERTA INS TO DISALLOWANCE OF RS.23 239/- UNDER SECTION 43B OF THE ACT FOR NON-PA YMENT OF EMPLOYEES CONTRIBUTION TO THE ESIC AND PF BEFORE THE DUE DATE PRESCRIBED UNDER THE RESPECTIVE ACTS RULES ORDER OR NOTIFICATION GOVER NING SUCH PAYMENTS. 10. THE CIT(A) CONFIRMED THE ACTION OF THE ASSESSIN G OFFICER ON THE GROUND THAT THE IMPUGNED AMOUNT PERTAINS TO EMPLOYEES CONTRIBU TION WHICH IS ALLOWABLE AS 5 ITA NO.396/PN/2014 DEDUCTION UNDER SECTION 36(1)(VA) OF THE ACT IF PA ID BY THE DUE DATE PRESCRIBED IN THE RESPECTIVE ACTS ONLY. 11. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSES SEE STATED THAT THE ISSUE HAS SINCE BEEN SETTLED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. GHATGE PATIL TRANSPORTS LTD. REPORTED IN (2014) 368 ITR 749 (BOM) . ON FACTS AS WE CAN SEE FROM THE ASSESSMENT ORDER THE ASSESSEE HAS ACTUALLY PAID TH E ENTIRE IMPUGNED AMOUNT ON ESIC AND PF WITHIN THE PREVIOUS YEAR RELEVANT TO TH E ASSESSMENT YEAR 2007-08 ITSELF MUCH BEFORE THE DUE DATE OF FILING OF RETURN . IN VIEW OF THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. GHATGE PATIL TRANSPORTS LTD. (SUPRA) THE ASSESSEE GETS THE RELIEF CLAIMED. 12. THUS THE GROUND OF APPEAL NO.2 RAISED BY THE A SSESSEE IS ALLOWED. 13. RESULTANTLY THE APPEAL FILED BY THE ASSESSEE I S PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 31 ST DAY OF JULY 2015. SD/- SD/- ( VIKAS AWASTHY ) ( R.K. PANDA ) # / JUDICIAL MEMBER / ACCOUNTANT MEMBER PUNE ; DATED : 31 ST JULY 2015. %&'#()!*!+( / COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-V PUNE; 4) THE CIT-V PUNE; 5) THE DR A BENCH I.T.A.T. PUNE; 6) GUARD FILE. % / BY ORDER ' # //TRUE COPY// $ %& # '( / SR. PRIVATE SECRETARY ) '* / ITAT PUNE