2015 (11) TMI 1546 - AT - Income Tax

Inclusion of service tax in computation of presumptive income under section 44BB - Held that - Service tax would not form part of gross receipt for the purpose of income computation under section 44BB of the Act. See Director of Income Tax vs. Mitchell Drilling International P. Ltd 2015 (10) TMI 259 - DELHI HIGH COURT - Decided in favour of assessee. Interest under section 234B allowable in the case of nonresident - Held that - In appeal DRP-II granted relief to the assessee by following the decision of the Hon ble Bombay High Court in the case of NGC Network Asia LLC (2009 (1) TMI 174 - BOMBAY HIGH COURT ) wherein it has been held that interest under section 234B and 234C is not leviable in the facts of the case. Nothing contrary was brought to our knowledge so following the same we are not inclined to interfere in the findings of DRP-II Mumbai who has correctly held that interest under section 234B is not allowable in the case of nonresident. - Decided in favour of assessee.

Summary

Issues:
1. Inclusion of service tax in computation of presumptive income under section 44BB of the I.T. Act, 1961.
2. Levy of interest under section 234A of the Act.

Analysis:

Issue 1: Inclusion of Service Tax in Computation of Presumptive Income under Section 44BB:
The primary issue in the appeal was the inclusion of service tax in the computation of presumptive income under section 44BB of the I.T. Act, 1961. The learned D.R. referred to the decision of the Hon'ble Delhi High Court in the case of Director of Income Tax vs. Mitchell Drilling International P. Ltd. The court's interpretation emphasized that service tax collected by the Assessee does not have any element of income and, therefore, should not form part of the gross receipts for computing presumptive income under Section 44BB. The court highlighted that service tax is collected by the Assessee merely as a collecting agency for the government and is not an amount paid or received for the services rendered. This interpretation was supported by circulars issued by the CBDT, further clarifying that service tax should not be included in fees for professional or technical services, aligning with the objective of conferring benefits on profits related to export turnover. Therefore, the court ruled in favor of the Assessee, concluding that service tax should not be included in the gross receipts for computing presumptive income under Section 44BB.

Issue 2: Levy of Interest under Section 234A of the Act:
The second issue pertained to the levy of interest under section 234A of the Act, which was consequential to the first issue. The Assessing Officer initially held that interest under section 234A was leviable in the case of a non-resident Assessee. However, in appeal, the DRP-II granted relief to the Assessee, citing the decision of the Hon'ble Bombay High Court in the case of NGC Network Asia LLC. The court upheld the decision of DRP-II, stating that interest under section 234A is not allowable in the case of a non-resident Assessee. The court found no contrary evidence and, therefore, upheld the decision of DRP-II, dismissing the appeal of the Revenue and allowing the appeal of the Assessee.

In conclusion, the judgment by the Appellate Tribunal ITAT Mumbai clarified the non-inclusion of service tax in the computation of presumptive income under section 44BB and upheld the relief granted to the Assessee regarding the levy of interest under section 234A in the case of a non-resident Assessee.