Per T.R. Sood, Accountant Member: This appeal by revenue is directed against order of CIT (Appeals) dated 1-9-2006 for above assessment year. In this appeal, revenue has taken following grounds:- (1)The CIT (Appeals) erred in holding that disallowance was made under section 43B whereas Assessing Officer has only added as revenue receipt. (2)The CIT (Appeals) erred in not appreciating fact that any taxes or levies collected or collectible by assessee on behalf of Government is in nature of deemed revenue receipt in hands of assessee till it is paid to Government. (3)The CIT(Appeals) erred in not appreciating fact that it is only discretion exercised by assessee not to route receipt of service taxes through P&L Account. 2.The brief facts of case are that assessee-company is engaged in t h e business of running recording and dubbing studio, production of advertisement film and TV serials, manufacturing of specialised computers, trading in technical solutions, production and distribution of feature film and software development. During assessment proceedings, Assessing Officer noticed that service tax was not being routed through profit and loss accounts and assessee had shown liability towards service tax at Rs. 5,72,374 as on 31-3-2002 in its balance sheet. Upon enquiry to furnish proof regarding payment of service tax on or before due date for filing of return of income it was submitted as under:- ' Note on applicability of section 43B for service tax payable:- Service tax Central tax that was introduced by making provisions in Chapter V of Finance Act, 1994 (section 64 to section 96). Act provides method of levy, circumstances in which levy would arise, inter alia, manner of payment etc., section 68 of Act, prior to its amendment on 16- 10-1998 envisaged that person providing taxable service must collect service tax and then pay it to Government account. Only when such person failed to collect tax, person is liable to pay tax. However, with effect from 16-10- 1998, section 68 was amended by omitting element of 'collection' and it provides that duty of paying service tax is on person providing service in prescribed manner. manner is prescribed in Rule 6 which prescribes that service tax is required to be paid only on value of taxable services received in particular month or quarter, as case may be and not on gross amount charged or billed to client. relevant provisions of service tax regulations are enclosed for your information and records. assessee is maintaining its books of account on accrual basis, service tax payable shows tax payable on gross amount billed and not amount payable as per gross amount received by assessee. As am is also company, service tax is payable on 25th of month immediately following said calendar month. company has paid service tax on amounts realised up to 31-3-2002 in April 2002, details of which are enclosed to this note. Hence, it is most humbly and respectfully submitted that no disallowance is warranted on service tax payable shown on outstanding as on 31-3-2002.' 3.After considering submissions, Assessing Officer observed as under:- ' (a) assessee follows mercantile system of accounting. But service tax has not been routed through profit and loss account. fact of showing service tax payable on liability side of balance sheet itself proves that service tax has been collected and has not been paid as on 31-3-2002. (b) Since service tax has not been routed through profit and loss account, service tax has not been debited and hence it is true that no disallowance can be made under section 43B. But service tax collected and not paid to Government account is revenue receipt in hands of assessee and is, accordingly, assessable. It can be claimed when it is paid. (c) As per service tax payment details provided by representatives, it nowhere appears that service tax payable shown at Rs. 5,72,374 has been remitted on or before due date of filing return of income.' 4.In background of these observations, sum of Rs. 5,72,374 being service tax which was not paid before due date for filing return of income was added to income of assessee. 5. Before CIT (Appeals), two fold submissions were made. Firstly it was contended that section 43B starts with non obstante clause and specifies that deduction 'otherwise allowable' under Act shall not be allowed unless it is actually paid. This means, that claim should be first preferred by assessee and same could be disallowed under section 43B only for reason of failure to make actual payment. If assessee had not preferred any claim towards service tax, there was no question of disallowing same. Secondly, it was argued that section 67 of Finance Act which deals with service tax was amended with effect from 6-10-1998 and provided that duty o f paying service tax is on person providing service in prescribed manner and this manner was prescribed under rule 6 which further provides that service tax is required to be paid only on value of taxable service received in particular month or quarter as case may be and not on gross amount charged or billed. CIT (Appeals) found force in above submission and deleted addition. Aggrieved, revenue is in appeal before us on this issue. 6. Before us ld. Departmental Representative while supporting order of Assessing Officer, also relied on grounds of appeal. 7. On other hand, learned counsel for assessee referred to section 43B of Act and submitted that any sum of tax, duty, cess or fee etc., can be disallowed if such sum is payable. This means that disallowance under section 43B would be attracted if assessee has failed to make payment towards any tax, duty, cess or fee etc., which assessee was obliged to pay. According to him word 'payable' is important and disallowance cannot be made if such duty or tax is not payable at all. He argued that service tax was Central tax which was introduced by making provisions in Chapter V of Finance Act, 1994 and provides for month of levy, circumstances on which levy would arise and manner of payment etc. Service tax was levied under section 67 of Finance Act, 1994 on gross or aggregate amount charged by service provider on receiver. Prior to amendment on 16-10- 1998 it was envisaged that person providing taxable service must collect service tax and then pay it to Government. On failure of such person to collect service tax, such person becomes liable to pay same. Lot of representations were made to Government, that sometimes service providers were not getting payment and, therefore, it should not be asked to make payment of service tax and, accordingly, Act was amended and it was provided by omitting element of collection. 8. learned counsel for assessee further relied on amended section 68 and invited our attention to sub-section (2) thereof which clearly provided that service tax shall be paid in manner prescribed and rate specified in section 68 and all other provisions of Chapter V of Finance Act, 1994. He then referred to Rule 6 of Service Tax Rules, 1994 which clearly provides that service tax shall be paid by 5th of month immediately following calendar month in which payments are received. Therefore, incidence of payment of service tax was related to receipt of payment mentioned on billing of service. 9. learned counsel for assessee vehemently argued that service tax is basically different from Sales Tax, Provident Fund, ESI, Excise Duty etc., referred to section 43B of Income-tax Act, because sales tax is payable by dealer as per Central Sales Tax Act and various State Sales Tax Acts on specified date of following month in which sale is completed irrespective of fact whether payment is received by dealer or not. liability would arise as soon as incidence of sale is completed. Similarly, liability to Excise Duty is attracted moment goods are removed from Warehouse or Godown. In case PF and ESI, liability to pay is on employer irrespective of fact whether employer has recovered same from its employees or not. Whereas in case of service tax, it becomes payable only when it is received from client. 10. learned counsel for assessee also referred to section 145A of Income-tax Act and argued that this provision makes it clear that ST, ED etc., have to be treated as part of purchase and sale of goods whereas that is not case with service tax. 11. He vehemently argued that section 43B starts with non obstante clause and specifies that deduction otherwise allowable under Act shall not b e allowed unless it is actually paid. This means that section 43B would be attracted only in those cases where deduction has been claimed but payment has not been made. But if no deduction has been claimed at all then there is no question of application of section 43B of Income-tax Act. 12. In case before us, service tax was never claimed as deduction because same was never debited to profit and loss account. Since companies are required to prepare accounts on accrual basis, service tax had to be shown on accrual basis and reflected as liability directly in balance sheet. As no deduction was claimed by assessee there is no question of disallowing same under section 43B of Income-tax Act. He also relied on case of Srikaollu Subbarao & Co. v. Union of India [1988] 173 ITR 708 (AP). 13. We have considered rival submissions carefully in light of relevant provisions of Income-tax Act as well as Service Tax Act. We find that relevant portion of section 43B reads as under:- ' 43B. Notwithstanding anything contained in any other provisions of this Act deduction otherwise allowable under this Act in respect of- (a) any sum payable by assessee by way of tax, duty, cess or fee, by whatever name called, under any law for time being in force, or' From plain reading of above provision it becomes clear that rigour of this provision would be attracted only in case where item is allowable as deduction but because of failure to make payment such deduction will not be allowed. It can be argued that in case of ST also assessee does not claim deduction since it has been held that non-payment of sales-tax would attract provisions of section 43B, but that is being done on basis of principles laid down by Calcutta High Court in case of Chowranghee Sales Bureau Ltd. v. CIT [1977] 110 ITR 385 that sales-tax is part of trading receipt. Further, section 145A clearly provides that for purpose of determining income under head 'Profits and gains of business or profession', amount of purchase and sales i.e., turnover would include any tax, duty, cess or fee. Therefore, rigour of section 43B may be applicable in case of sales-tax or Excise Duty but same cannot be said to be position in case of service tax because of two reasons. Firstly, assessee is never allowed deduction on account of service tax which is collected on behalf of Government, and paid to Government accordingly. Therefore, service provider is merely acting as agent of Government, and is not entitled to claim deduction on account of service tax. Hence, on this account alone addition under section 43B could not be made and same has been correctly deleted by CIT (Appeals). 14. second aspect of this issue is also important. Section 43B(c) uses expression 'any sum payable'. For making any disallowance, first of all it has to be established that such sum is payable. Dictionary meaning of word 'payable' in Concise Oxford English Dictionary is:- (1) required to be paid; (2) able to be paid; and (3) debts owned by business Chambers Dictionary (New Edition) defines word 'payable' as 'that may or should be paid; due or profitable'. Black's Law Dictionary, Sixth Edition defines term 'payable' as under:- ' Capable of being paid; suitable to be paid; admitting or demanding payment; justly due; legally enforceable. sum of money is said to be payable when person is under obligation to pay it. Payable signifies obligation to pay at future time, but when used without qualification, term normally means that debt is payable at once, as opposed to 'owing'.' above definition would show that word 'payable' is used in section 43B, to our understanding, would mean that there is kind of obligation on part of payee to make payment which is already due. For example, when some body purchases goods then other person has got liability to pay price of goods and it can be said that price of goods is payable by customer. If customer simply looks at cost it cannot be said that he has become liable to make payment. This can be further understood by way of n example. For instance, whenever Chartered Accountant raises bill for professional services which are subjected to service tax, it is not necessary that client will accept bill as such and make payment accordingly. In that situation, Chartered Accountant cannot be fastened with liability to pay service tax. But, in any case sales-tax situation is different. For example, section 6(1) of Central Sales Tax Act, 1956 provides that:- ' 6. Liability to tax on inter-State sales.-[(1)] Subject to other provisions contained in this Act, every dealer shall, with effect from such date as Central Government may, by notification in Official Gazette, appoint, not being earlier than thirty days from date of such notification, be liable to pay tax under this Act on all sales of goods other than electrical energy, effected by him in course of inter-State trade or commerce during any year on and from date so notified: [Provided that dealer shall not be liable to pay tax under this Act on any sale of goods which, in accordance with provisions of sub-section (3) of section 5, is sale in course of export of those goods out of territory of India.]' above provision clearly shows that dealer would become liable to make sales-tax payment moment he effects sales in course of inter-State trade or commerce. This shows that liability to make payment of sales-tax is not depending on fact whether such dealer has received payment from customer of goods or not. liability is fastened to transaction in sales and once such sale is effected, dealer becomes liable to pay. 15. Now, in case of service tax, when and how amount becomes payable has been provided in section 68 of Finance Act, 1994 as well as Rule 6 of Service Tax Rules which read as under:- ' 68. Payment of service tax.-(1) Every person providing taxable service to any person shall pay service tax at rate specified in section 66 in such manner and within such period as may be prescribed. (2) Notwithstanding anything contained in sub-section (1), in respect of any taxable service notified by Central Government in Official Gazette, service tax thereon shall be paid by such person and in such manner as may be prescribed at rate specified in section 66 and all provisions of this Chapter shall apply to such person as if he is person liable for paying service tax in relation to such service.' Rule 6 of Service Tax Rules ' 6. Payment of Service Tax.-(1) service tax shall be paid to credit of Central Government by 5th of month immediately following calendar month in which payments are received, towards value of taxable service: Provided that where assessee is individual or proprietary firm or partnership firm, service tax shall be paid to credit of Central Government by 5th of month immediately following quarter in which payments are received, towards value of taxable services: Provided further that notwithstanding time of receipt of payment towards value of services, no service tax shall be payable for part or whole of value of services, which is attributable to services provided during period when such services were not taxable: Provided also that service tax on value of taxable services received during month of March, or quarter ending in March, as case may be, shall be paid to credit of Central Government by 31st day of March of calendar year.' From above section 68 it becomes clear that service tax has to be paid in manner which may be prescribed and this has been prescribed in Rule 6 of Service Tax Rules. plain reading of Rule 6 would show that service provider becomes liable to make payment of service tax by 5th of month immediately following calendar month in which payments are received towards value of taxable service. first proviso gives exception in case of individual or proprietary firms or partnership firms, and in such cases, service tax has to be paid to credit of Central Government by 5th of month immediately following quarter in which payments are received. only difference is that in case of individual or proprietary or partnership firm, payment has to be made on 5th of following month after following quarter whereas in case of other organisations it has to be paid on 5th of month immediately following calendar month. But in both cases, liability arises to make payment only after service provider has received payments. 16. If there is no liability to make payment to credit of Central Government because of non-receipt of payments from receiver of services, then it cannot be said that such service tax has become payable in terms of clause (a) of section 43B because that clause specifically mentions 'sum payable by assessee'. In this regard, Hon'ble Andhra Pradesh High Court in case of Srikaollu Subba Rao & Co. (supra) has made following observations:- ' 17. One other contention addressed to us is that liability to pay sales- tax for month of 18-3-1984, was disallowed in terms of section 43B in all cases before us. Shri Swamy, learned counsel, pointed out that petitioners filed A2 monthly returns according to which they pay taxes. Our attention has been invited to rule 17 of AP Sales-tax Rules, 1957, which in terms, provides that tax in relation to return shall be paid before 25th day of succeeding month. It is argued that where statute itself prescribes date of payment no exception could be taken acting under section 43B, that amount was not paid rendering justification for its disallowance. It is urged that section 43B can have no application to cases where statutory liability which was incurred in accounting year is also not payable according to statute in same accounting year. We find considerable force in contention of Shri same accounting year. We find considerable force in contention of Shri Swamy. In order to apply provisions of section 43B, it seems to us that not only should liability to pay tax or duty be incurred in accounting year but amount also should be statutorily 'payable'in accounting year. Section 43B itself is clear to this extent. It refers to 'sum payable' in clause (a) as well as in clause (b). If Legislature intended, it should have so provided that any sum for payment of which liability was incurred but assessee would not b e allowed unless such sum is actually paid. Keeping in mind object for which section 43B was enacted, it is difficult to subscribe to view that routine application of that provision is called for in cases where 'taxes and duties' for payment of which liability was incurred in accounting year, were not statutorily payable in that accounting year. If, under provisions of any statute, tax or duty is payable after close of accounting year, different consideration would prevail and it may not be open to ITO to disallow tax or duty which is statutorily payable after accounting year. In fact, amendment brought about, which is coming into force on 1-4-1988, permitting deduction of taxes and duties paid before filing of IT returns clearly supports view that 'taxes and duties' not statutorily payable during accounting year do not fall to be disallowed under section 43B.' 17.In view of above observations, we are of view that since service tax was not payable by assessee, rigour of section 43B could not have been applied to case of assessee. Under these circumstances, we find nothing wrong with order of CIT (Appeals) on this issue and same is confirmed. 18. In result, appeal filed by revenue is dismissed. *** ASSISTANT COMMISSIONER OF INCOME TAX v. REAL IMAGE MEDIA TECHNOLOGIES (P) LTD.