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2016 (2) TMI 301 - AT - Income TaxService tax collected in relation to projects where the income was being offered to tax on gross basis u/s 44D r.w.s. 115A - CIT(A) held that the service tax was not the part of the gross receipts to be taxed u/s 44D r.w.s 115A - Held that - Service tax being a statutory liability, would not involve any element of profit and accordingly, the same could not be included in the total receipts for determining the presumptive income. In the light of view taken by the Mumbai Bench in case of Islamic Republic of Iran Shipping Lines Vs. DCIT 2011 (4) TMI 637 - ITAT MUMBAI especially when the ld. DR did not place any material before us, controverting the aforesaid findings of the ld. CIT(A) so as to enable us to take a different view in the matter nor brought to our notice any contrary decision, we are of the opinion that service tax paid by the assessee could not form part of amount for the purpose of deemed profits u/s 44BB unlike the other amounts received towards reimbursement - Decided against revenue
Issues Involved:
1. Whether service tax should be included in the gross receipts for taxation under Section 44D read with Section 115A of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Inclusion of Service Tax in Gross Receipts for Taxation: The Revenue appealed against the CIT(A)'s decision that service tax should not be part of gross receipts taxed under Section 44D read with Section 115A of the Income Tax Act, 1961. The assessee, a non-resident company from France, engaged in consultancy services for road infrastructure projects, had collected service tax amounting to Rs. 22,95,505/- and argued that this amount should not be included in its taxable income as it does not constitute income but a statutory liability collected on behalf of the government. The Assessing Officer (AO) added the service tax to the gross receipts, relying on precedents like Siem Offshore Inc. and Technip Offshore Contracting BV, asserting that when income is taxed on a gross basis, the entire receipt, including service tax, should be considered. On appeal, the CIT(A) sided with the assessee, referencing the decision in the assessee's own case for the previous assessment year (2007-08), where it was held that service tax collected and paid to the government should not be included in the gross receipts for taxation. The CIT(A) emphasized that service tax is a statutory liability and does not constitute income for the service provider. The ITAT upheld the CIT(A)'s decision, noting that the facts and circumstances of the current assessment year were identical to the previous year. The tribunal referenced the order dated 18.12.2012, which confirmed that service tax should not be included in the gross receipts, and cited various decisions including Mitchell Drilling International Pty. Ltd., where it was held that service tax, being a statutory liability, does not involve any element of profit and should not be included in the total receipts for determining presumptive income. The tribunal concluded that in the absence of any contrary decision, the appeal by the Revenue must be dismissed, affirming the CIT(A)'s order that service tax should be excluded from the gross receipts for taxation purposes. Conclusion: The appeal by the Revenue was dismissed, and it was held that service tax collected by the assessee should not be included in the gross receipts for the purpose of taxation under Section 44D read with Section 115A of the Income Tax Act, 1961. The decision was based on the precedent in the assessee's own case and other similar rulings, establishing that service tax is a statutory liability and does not constitute income.
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