Expense Deduction in respect of disputed demand of Service Tax to be given in year of payment: ITAT

One of the Grounds of Appeal of the Department with ITAT was that “The Id. CIT(A) has earned in deleting the addition of Rs.56,08,748/- being the service tax when the assessee has not accepted the liability and the dispute is pending before the Hon’ble Court and a liability becomes final when the made of dispute reaches finality.”

The Ld. D.R. submitted that the CIT(A) ignored the fact that the assessee has made a reversal entry and transaction was not properly shown relating to the purchase, as well as the cancellation, was also not reflected in the evidence produced before the Assessing Officer. Thus, the Ld. D.R. submitted that the CIT(A) was not right in deleting the said addition.

ITAT Order:

8. We have heard both the parties and perused all the relevant materials available on record. The Assessing Officer disallowed the claim of Service Tax on the ground that the said demand was related to earlier years and the said Service Tax liability of the assessee or the recipient was on that point of time disputed by the parties. The Assessing Officer has not taken cognisance of the fact that the Service Tax of Rs.56,08,748/- was paid by the assessee during the year under consideration. The deduction in respect of the Service Tax is statutory liability irrespective of the period to which such liability pertains to. Thus, the assessee is eligible for the deduction of the said amount during the year under consideration. The CIT(A) was right in deleting the said addition and there is no need to interfere with the findings of the CIT(A). Ground no.1 of Revenue’s appeal is dismissed.

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