Friday, February 10, 2017

No sec. 43B disallowance on tenant due to non-payment of service-tax on rental payment


a) Assessee-company was running trading business from rented premises and it was paying gross rent (inclusive of service tax) to the landlord.

b) Assessing officer (AO) allowed assessee's claim of payment of rent as deduction. Later on, commissioner passed revisional order to invoke section 43B disallowance as there was default in payment of service tax portion on rental payments.

c) Aggrieved-assessee filed instant appeal before Tribunal.

Tribunal held in favour of assessee as under:

1) Liability to pay the service tax component to landlord was a contractual obligation between the assessee and landlord, whereas to remit the same to the government was a statutory on the part of the landlord.

2) It was the statutory liability of the landlord to pay the service tax to the state. The liability between the assessee (being tenant) and landlord was only a contractual liability for which section 43B would not be application at all.

3) Hence, if section 43B had to be invoked, it had to be invoked only against the landlord, and the non-payment of such component of service tax to the landlord by the assessee was immune from the operation of section 43B. - [2017] 77 324 (Kolkata - Trib.)

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