2016 (5) TMI 1451 - AT - Income Tax

Computation of income u/s 44B - service tax inclusion - Held that - In view of the ratio of law laid down by the co-ordinate bench of the Tribunal in the case of Marubeni Corporation vs. DCIT 2013 (12) TMI 1550 - ITAT MUMBAI and in the light of decision of the Hon ble Delhi High Court in the case of DIT vs. Mitchell Drilling International Pvt. Ltd. 2015 (10) TMI 259 - DELHI HIGH COURT we hold that service tax collected by the assessee and paid to the government account having no profit element cannot be included in the gross receipts for computation of income under section 44B of the Act. This issue is accordingly decided in favour of the assessee.

Summary

Issues:
- Inclusion of service tax in gross receipts for computation of income under section 44B of the Income Tax Act.
- Whether service tax collected should be part of gross receipts for determining presumptive profit under section 44B.

Analysis:
1. The appeal was against the order of the Commissioner of Income Tax (Appeals) regarding the addition of service tax amount to the total revenue for profit computation under Section 44B of the Income-tax Act, 1961 for the assessment year 2010-11.

2. The controversy revolved around whether the service tax collected should be considered in the gross receipts for income computation under section 44B. The Assessing Officer relied on the Authority of Advance Ruling and a decision of the Delhi Tribunal to include service tax in total receipts for determining presumptive profit under section 44BB.

3. The assessee challenged this decision before the Tribunal, citing previous tribunal decisions and a High Court ruling in favor of excluding service tax from gross receipts for income calculation under section 44B. The Tribunal noted that service tax, being a statutory liability without profit element, should not be included in gross receipts for income computation.

4. The Tribunal referred to its earlier decisions in the assessee's own case for different assessment years, where it was held that service tax collected and paid to the government, having no profit element, should not be part of gross receipts for determining presumptive income under section 44B.

5. Following the precedent set in previous cases and considering the decision of the High Court, the Tribunal ruled in favor of the assessee, allowing the appeal and holding that service tax collected by the assessee, which does not involve any profit element, should not be included in gross receipts for income computation under section 44B.

6. The Tribunal concluded that based on the legal principles established in previous judgments and the absence of any new circumstances, the service tax collected by the assessee and paid to the government should not be considered in the gross receipts for computing income under section 44B. The appeal of the assessee was allowed accordingly.