ACCORDING TO THE CASE OF CIT VS REAL IMAGE MEDIA TECHNOLOGIES LTD AT CHENNAI HIGH COURT IN 2008, IT WAS DECIDED THAT SERVICE TAX IS NOT A TAX CESS OR ANY FEE PAYABLE TO GOVT AND IT DOES NOT COME UNDER THE PERVIEW OF SECTION 43B IF AND ONLY IF IT IS NOT ROUTED THROUGH P AND L THAT IS SERVICE TAX ACCOUNT. MY QUESTIONS ARE:
1) CAN I ROUTE SERVICE TAX THRU P AND L? , BECAUSE 145A IS SILENT ABOUT IT.
2) IF I ROUTE SERVICE TAX THRU P AND L THEN THUS 43B APPLY TO SUCH SERVICE TAX?
Yes you can.
If you are not eligible for CENVAT credit, you can book Service Tax as expenses.
But then 43B will apply, and you will entitled to claim only that tax which has been paid on or before due date of ROI.
Although I dont know about that case law....
1. Yes you can route ST through P&L A/c.
Sec. 145A provides for specific inclusion in P&L A/c; the motive was to make assesse's route the tax/duty/cess/fee on goods through P&L A/c when assessment under IT Act, 1961 is done. Clearly sec 145A does not apple to ST as it is a tax on service. But u/s 145, the assessee can route ST through P&L A/c if it is the accounting method he regularly follows.
2. Yes, if you route ST through P&L A/c, sec 43B will apply to the ST which becomes payable during the year and is not paid by the date of filing return of income u/s 139(1).
There are two issues,
Applicability of Sec. 145A and Sec. 43B
1st Re. Sec. 145A, as per Sec. 145A only such expenses are to be added to purchase and sales which have nexus to purchase and sale of raw material and finished goods transaction. However as far as service tax is concerned, it does not covered under purview of section 145A and therefore excluded from it.
Now considering Sec. 43B, in very simple words, if you are claiming any CENVAT credit on service tax than it shall not be required to route through P & L account. If you do not claim CENVAT credit than you have to book expense and it is require to pay with in due date for payment.
Jay Hind
Himanshu Mehta
There are two issues,
Applicability of Sec. 145A and Sec. 43B
1st Re. Sec. 145A, as per Sec. 145A only such expenses are to be added to purchase and sales which have nexus to purchase and sale of raw material and finished goods transaction. However as far as service tax is concerned, it does not covered under purview of section 145A and therefore excluded from it.
Now considering Sec. 43B, in very simple words, if you are claiming any CENVAT credit on service tax than it shall not be required to route through P & L account. If you do not claim CENVAT credit than you have to book expense and it is require to pay with in due date for payment.
Jay Hind
Himanshu Mehta
CAclubindia
