ITAT Dehradun: No Section 43B Disallowance on Unpaid Service Tax If Not Routed Through P&L Account

Case Overview

Case Name: Schlumberger Solutions Pvt. Ltd. Vs ACIT (ITAT Dehradun)
Assessment Year: 2010–11
Order Date: 30.03.2026
Tribunal: Income Tax Appellate Tribunal, Dehradun Bench

Background of the Dispute

This matter came before the ITAT Dehradun in the form of a Miscellaneous Application filed by the assessee, Schlumberger Solutions Pvt. Ltd., seeking a recall of a prior tribunal order dated 29.11.2021 passed in ITA No.3266/Del/2017 for Assessment Year 2010–11.

The earlier order of the coordinate bench had dismissed the Revenue's appeal by ruling on an entirely different question — specifically, whether service tax received forms part of gross receipts for the purpose of computing income under Section 44BB of the Income Tax Act, 1961. While the Revenue's appeal was dismissed on that basis, the assessee pointed out that this determination was wholly unrelated to the actual issue that had been raised by the Revenue before the tribunal.

The Actual Issue: Disallowance Under Section 43B

The core dispute, as correctly framed by the assessee in the Miscellaneous Application, revolved around an entirely different provision — Section 43B of the Income Tax Act, 1961.

During assessment proceedings, the Assessing Officer (AO) along with the Transfer Pricing Officer (TPO) had disallowed an unpaid service tax liability of ₹1,65,73,768 under Section 43B. The basis for this disallowance was that the said service tax liability remained unpaid during the relevant previous year.

However, the Dispute Resolution Panel (DRP) intervened and deleted this disallowance. The DRP's reasoning was straightforward and well-grounded:

  • The service tax amount in question had not been routed through the Profit and Loss Account of the assessee.
  • Since the amount was never credited to the P&L Account, no deduction had been claimed by the assessee in respect of this liability.
  • In the absence of any deduction being claimed, the question of making a disallowance under Section 43B simply did not arise.

Aggrieved by the DRP's direction deleting this disallowance, the Revenue filed an appeal before the ITAT Dehradun.

The Critical Error in the Earlier Tribunal Order