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2019 (12) TMI 1467 - AT - Income TaxExclusion of service tax portion in computing income u/s 44BB - CIT(A) has allowed the claim of the assessee on the basis of his earlier decision for the A.Y. 2016-17 dated 25.01.2018 - HELD THAT - No doubt the law relied by the Ld. Representative of the revenue speaks that the service tax is the part and parcel of the profit therefore the same was subject to presumptive profit and gain u/s 44BB of the Act. The issue has been considered by Hon ble Delhi High Court in the case of Mitchell Drilling International 2015 (10) TMI 259 - DELHI HIGH COURT . Subsequently by ITAT Mumbai Bench in the case of M/s. Weatherford Drilling 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.
Issues involved:
1. Exclusion of service tax from gross receipts for the purpose of income computation under section 44BB of the Income Tax Act. 2. Interpretation of the term "aggregate" in section 44BB. 3. Applicability of judicial precedents on the treatment of service tax in gross receipts for presumptive taxation. Issue 1: Exclusion of service tax from gross receipts: The appeal was filed by the revenue against the order of the Commissioner of Income Tax (Appeals) relevant to the Assessment Year 2015-16. The revenue contended that the service tax should not be excluded from gross receipts for income computation under section 44BB. The revenue argued that the term "aggregate" in the section implies a collective amount, and cited a pending appeal before the High Court on similar grounds. The assessee had reported gross revenues including service tax, and the revenue added the service tax amount to the net receipts, resulting in a higher assessed income. The CIT(A) allowed the claim of the assessee based on a previous decision and directed the exclusion of service tax portion in computing income under section 44BB. Issue 2: Interpretation of the term "aggregate": The Tribunal analyzed the CIT(A)'s decision and noted that it was based on a previous decision for the A.Y. 2016-17. The assessee relied on judicial precedents such as the Delhi High Court case of Director of Income Tax-1 Vs. Mitchell Drilling International and the Mumbai Bench case of M/s. Weatherford Drilling Vs. DCIT to support the exclusion of service tax from gross receipts under section 44BB. On the other hand, the revenue cited a Mumbai Tribunal decision asserting that service tax is part of profit and should be included for presumptive tax calculation. Considering the legal precedents and arguments presented, the Tribunal upheld the CIT(A)'s decision to exclude service tax from gross receipts, stating that it was decided judiciously and correctly. Issue 3: Applicability of judicial precedents: The Tribunal considered various judicial precedents, including the decision of the Delhi High Court and the Mumbai Bench, which supported the exclusion of service tax from gross receipts for the purpose of presumptive taxation under section 44BB. The Tribunal concluded that the CIT(A) had correctly decided the matter, aligning with the legal interpretations provided by the precedents. Therefore, all issues were decided in favor of the assessee against the revenue, leading to the dismissal of the revenue's appeal. In conclusion, the Appellate Tribunal upheld the decision of the Commissioner of Income Tax (Appeals) to exclude service tax from gross receipts for income computation under section 44BB. The Tribunal based its decision on legal precedents and interpretations, ultimately ruling in favor of the assessee and dismissing the revenue's appeal.
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