2014 (1) TMI 24 - AT - Income Tax

Reimbursement of service lax, is to be included in the gross receipts u/s 44BB - Held that - Following Commissioner of Income Tax vs Halliburton Offshore Services Inc. 2007 (9) TMI 230 - UTTARAKHAND HIGH COURT - When it was not in dispute that the amount had been received by the assessee i.e. nonresident company rendering services under the provisions of section 44BB - The Assessing Officer was justified in imposing income tax thereon - Decided against assessee. Whether reimbursement of actual expenses incurred on behalf of customers be included in the gross receipts u/s 44BB - Held that - The assessee is getting reimbursement of service tax paid to the Government of India from its client on production or submission of original treasury challan of payment - There is no element of income in the hands of assessee or any occasion of incurring any expenses by the assessee in this regard - The Assessing Officer and the Commissioner of Income Tax(A) were not justified in holding that the amount of reimbursement of service tax received by the assessee is to be included in the gross receipts for the purpose of section 44BB of the Act - Decided in favour of assessee.

Summary

Issues Involved:
1. Inclusion of reimbursement of service tax in gross receipts under section 44BB of the Income Tax Act, 1961.

Analysis:
1. Ground No.1:
The appellant challenged the inclusion of an amount received on account of reimbursement of service tax in the gross receipts under section 44BB of the Income Tax Act, 1961. The appellant's representative acknowledged that a similar issue had been decided against the appellant by the Hon'ble Uttarakhand High Court in a previous case. The Tribunal upheld the decision citing the precedent, leading to the dismissal of this ground in favor of the revenue.

2. Ground No.2 & 3:
The appellant contested the inclusion of amounts received as reimbursement of actual expenses from customers in the gross receipts under section 44BB. The appellant argued that the reimbursement of service tax by the customer, ONGC, was not income as it equaled the amount paid by the appellant to the government. The Tribunal noted that the appellant received 100% reimbursement of service tax paid to the government from ONGC, with no element of income or expense involved for the appellant. Consequently, the Tribunal held that the amount of reimbursement of service tax should not be included in the gross receipts for determining income under section 44BB. Therefore, the Tribunal allowed ground no. 2 and 3 of the appellant, directing the Assessing Officer not to include the reimbursement amount in the income calculation under section 44BB.

In conclusion, the Tribunal partially allowed the appeal of the appellant concerning the inclusion of reimbursement of service tax in the gross receipts under section 44BB of the Income Tax Act, 1961. The decision was based on the clear understanding that the reimbursement received did not constitute income for the appellant and should not be considered in the income calculation under the specified section.