No Disallowance under section 43B of Income tax on account of GST payable r.w.s. 143(1) intimation: Delhi ITAT

 

Here is an important analysis by ITAT Delhi regarding the validity of disallowance under section 43B of Income tax on account of GST payable r.w.s 143(1) intimation. It was in the case of ATS Real Estate Builders P. Ltd. vs. DCIT (ITA No. 1207/DEL/2024, dated 27-01-2025).

Let us have a Short Overview of the case:

Key Takeaways:
1. Disallowance u/s 43B on GST Payable:
• The CPC made an adjustment under section 43B of the Income Tax Act, 1961, disallowing ₹3,55,01,693 on account of GST payable.
• The assessee’s contention was that GST collected was never claimed as an expense in the Profit & Loss account but was directly credited to the Government’s account.
• The amount payable at the year-end was shown under current liabilities as “GST payable.”

2. Legal Argument by the Assessee:
• Section 43B applies only to deductions claimed in the P&L account. If no deduction is claimed, there is no question of disallowance.
• Supporting case laws cited:
• CIT vs. Noble and Hewitt (I) P. Ltd. (Delhi HC)
• CIT vs. Calibre Personnel Services P. Ltd. (Bombay HC)
• CIT vs. S & A Finman Ltd. (ITAT Delhi)
• Adjustment u/s 143(1) is not permissible when an issue is debatable. Supporting precedents:
• Abhishek Cements Ltd. vs. Union of India (Delhi HC)
• CIT vs. Eicher Goodearth Ltd. (Delhi HC)

3. ITAT Delhi’s Ruling:
• The Revenue failed to provide evidence that the GST payable was debited to the P&L account or claimed as a deduction.
• Delhi HC’s decision in Noble and Hewitt (I) P. Ltd. was relied upon, which clarified that section 43B does not apply when GST or service tax is neither debited to the P&L account nor claimed as an expense.
• ITAT deleted the disallowance and ruled in favor of the assessee.

Implications of the Decision:
1. GST payable at year-end cannot be disallowed under section 43B if it was never claimed as an expense.
2. Adjustments u/s 143(1) cannot be made on debatable issues without proper verification.

The copy of the order is as under:

1737970157-t44nmN-1-TO