Service tax and service charges
Bharat Bhatia
(Querist) 09 April 2012
This query is : Resolved
Whether service tax payable amounting to Rs.8,44,438/- was disallowable under section 43 (b) of the Act. The assessee company disclosed a sum of Rs.39,73,854/- as expense payable in its balance sheet out of the above a sum of Rs.12,20,000/- was shown as payable towards service tax out of which Rs.3,76,268/- was paid before filing return of the tax, thus, the balance unpaid amount of service tax was Rs.8,44,438/-, this amount was not allowed and was added back to the income under section 43 (b) of the Act. As per rule 6 of Service Tax Rules, 1994, the service tax was payable on amount received by the assessee. Whereas no amount was received emphasis that the expression receipt is constructed as per method of accounting followed. The assessee was following mercantile method of accounting as soon as the invoice was raised, charging service tax. Such service tax was not received by the assessee.
Please advise whether disallowance under section 43 (b) of the Act is correct and within law?
Sankaranarayanan
(Expert) 09 April 2012
There are two way of service tax will be calculated , Some are paying the tax according to the invoices what they raised during the financial year,
How you arrived the tax liability, you yourself expressed that your company followed and paid according to the receipt of amount,
If you given it as provision of liability then the department added back the amount as income.
