September 2013
Knight Frank (India) Pvt. Ltd. v. Addl. CIT ITAT Mumbai `A’ Bench Before B. Ramakotaiah (AM) and Vivek Verma (JM) ITA No. 2021/Mum/2011 A.Y.: 2007-08. Decided on: 10th July, 2013. Counsel for assessee/revenue: M. M. Golvala/ Kalik Singh.
By Jagdish D. Shah, Jagdish T. Punjabi, Chartered Accountants
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Sections 43B, 145A. Provisions of section 145A do not apply to service tax. Accordingly, service tax is not includible in cost of components.
Facts: The assessee had not considered service tax for computing cost of components. In the course of assessment proceedings the Assessing Officer (AO) asked the assessee to explain why the same should not be included in view of the provisions of section 145A. Rejecting the submissions made by the assessee, the AO enhanced the trading profit by Rs. 69,20,599 and added the same to the total income returned by the assessee.
Aggrieved, the assessee preferred an appeal to CIT(A) who sustained the order of the AO on the point of inclusion of service tax by invoking the provisions of section 145A.
Aggrieved, the assessee preferred an appeal to the Tribunal where it placed reliance on the decision of Delhi High Court in the case of CIT vs. Noble & Hewitt (I) Pvt. Ltd. (305 ITR 324)(Del) and Chennai ITAT decision in the case of ACIT vs. Real Image Media Technologies Pvt. Ltd. (306 ITR 106)(AT-Chennai).
Held:
The Tribunal held that since the assessee is a service provider company patently the provisions of section 145A cannot be made applicable because the provision was specifically introduced for the purposes of manufacturing segment of the business. It noted that section 145A(a)(ii) mentions “…by the assessee being goods to the place of location & conditions as on the date of valuation are required to be included.” It also noted that the issue is now covered by the decisions relied upon by the assessee. Following the said decisions, the Tribunal set aside the order of CIT(A) and directed the AO to delete the addition.
This ground of appeal was decided in favour of the assessee.
