2020 (1) TMI 1364 - AT - Income Tax

Correct procedure for calculating receipts - income from business and profession in case of currency conversion - difference in the revenues offered to tax and the revenues as per 26AS - HELD THAT - We see no reasons to interfere in the conclusion so arrived at by the learned CIT(A). The rate at which revenues are required to be converted in the hands of the assessee is to be computed in accordance with Rule 115(1) which refers to the TT Buying Rate on the specified date. It is therefore possible, in fact inevitable, that they may be variations in the revenues computed in the hands of the assessee vis-a-vis the revenues converted as on the date on which the foreign currency payments are made by the payee. We have noted that learned CIT(A) has any way remitted the matter could be filed of the assessing officer for verification of the applicable TT Buying Rate under rule 115(1). We therefore see no infirmity in the order of the learned CIT(A) and declined to interfere the matter. Service tax should be excluded from gross receipts for the purpose of computation of income u/s. 44BB - HELD THAT - ITAT Mumbai Bench in the case of M/s. Weatherford Drilling Vs. DCIT 2018 (6) TMI 1526 - ITAT MUMBAI in which it has been clearly held that the service tax is not liable to be include in gross receipt in terms of Section 44BB(1) r.w. Section 44BB(2) of the Act because the same is not part of the gross receipt for the purpose of depositing the presumptive tax. Taking into account all the facts and circumstances, we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage. Accordingly, we decide all the issues in favour of the assessee against the revenue.

Summary

Issues:
1. Correct procedure for calculating receipts in the case of income from business and profession in case of currency conversion.
2. Exclusion of service tax from gross receipts for the purpose of computation of income u/s. 44B.

Issue 1: Correct procedure for calculating receipts in the case of income from business and profession in case of currency conversion:

The appeal pertains to an order passed by the CIT(A) in the matter of assessment under section 143(3)/144C of the Income Tax Act, 1961, for the assessment year 2014-15. The dispute arose when there was a variance in the revenues offered to tax and the revenues as per 26AS due to currency conversion differences. The Assessing Officer brought an amount into the hands of the assessee, which was contested in appeal. The CIT(A) upheld the claim of the assessee but remitted the issue to the assessing officer for limited verification. The key contention was whether to adopt the rate used by ONGC for conversion or the rate applied by the assessee under Rule 115. The Tribunal observed that Rule 115 specifies the manner of foreign currency conversion for profits and gains of business and profession, and the proviso relates to tax deduction at source. The Tribunal held that accurate computation of income is crucial, and the correct procedure for currency conversion based on Rule 115(1) should be followed. The assessing officer was directed to verify the applicable TT Buying Rate under Rule 115(1) to ensure correctness.

Issue 2: Exclusion of service tax from gross receipts for the purpose of computation of income u/s. 44B:

The second ground of appeal raised by the assessee related to the exclusion of service tax from gross receipts for computing income under section 44B. The Tribunal noted that a similar issue was decided in favor of the assessee by a coordinate bench for the assessment year 2015-16. The Tribunal referred to the CIT(A)'s order in the previous year and held that the exclusion of service tax from gross receipts was justified. The Tribunal considered various legal precedents and upheld the CIT(A)'s decision, emphasizing that service tax should not be included in gross receipts for the purpose of presumptive tax under section 44BB. The Tribunal dismissed the appeal, aligning with the earlier decision and finding no reason to interfere.

In conclusion, the Tribunal upheld the CIT(A)'s decisions on both issues, emphasizing the correct procedure for currency conversion under Rule 115(1) and the exclusion of service tax from gross receipts for computation of income u/s. 44B. The appeal was dismissed, affirming the rulings in favor of the assessee.