2021 (7) TMI 1356 - AT - Income Tax

Computation of profits under the presumptive provision of section 44BB - Receipts on account tools lost in hold as includible in the gross receipts - case of the assessee is that the said receipt is of capital in nature and hence not chargeable to tax - CIT held that the amount received by the assessee on account of equipment lost in hole is not includible in the gross revenue for the purpose of computation of profits under the presumptive provisions of section 44BB of the Act, when the said provisions are a complete code of taxation in themselves and do not distinguish between revenue and capital receipts having made allowance for expenditure including depreciation on capital assets to the extent of 90% of gross revenue - HELD THAT - This issue has been decided by the Hon ble Uttarakhand High Court in asessee s own case 2019 (4) TMI 1177 - UTTARAKHAND HIGH COURT which has been confirmed by the Hon ble Supreme Court 2017 (11) TMI 78 - SUPREME COURT Receipts on account of services tax - Assessee has claimed that service tax has no profit element in it and is collected on account of statutory requirement and, therefore, it is not taxable u/s.44 BB of the Act. The AO took the view that service tax has the profit element and, therefore, includible in the gross turnover of the assessee. This issue has also been considered by the Hon ble Uttarakhand High Court in assessee s own case 2019 (4) TMI 1177 - UTTARAKHAND HIGH COURT - nce the issue is now well settled in favour of the assessee and against the revenue we do not find any reason to interfere with the findings of the CIT(A). The grounds relating to this issue are also dismissed.

Summary

Issues:
1. Inclusion of amount received on account of 'equipment lost in hole' in gross revenue for computation of profits under section 44BB of the Act.
2. Inclusion of receipts on account of service tax in gross revenue.

Analysis:

Issue 1:
The appeal by the revenue challenges the order of the CIT(A) regarding the inclusion of the amount received on account of 'equipment lost in hole' in the gross revenue for profit computation under section 44BB of the Act. The revenue contends that the provisions of section 44BB are a complete code of taxation and do not differentiate between revenue and capital receipts. However, the assessee argues that the receipt in question is capital in nature and not taxable. The Hon'ble Uttarakhand High Court and subsequently the Hon'ble Supreme Court have ruled in favor of the assessee in similar cases, leading to the dismissal of the revenue's appeal by the ITAT Delhi.

Issue 2:
The second issue pertains to the inclusion of receipts on account of service tax in the gross revenue for profit computation. The assessee asserts that service tax has no profit element and is collected as a statutory requirement, thus should not be taxable under section 44BB of the Act. The AO, on the other hand, argues that service tax does have a profit element and should be included in the gross turnover. The Hon'ble Uttarakhand High Court has previously ruled in favor of the assessee on this matter, leading to the dismissal of the revenue's appeal by the ITAT Delhi.

The ITAT Delhi, after careful consideration of the arguments and relevant legal precedents, upheld the decisions of the CIT(A) in both issues, as they were in line with the judgments of the higher courts. The ITAT Delhi found no reason to interfere with the CIT(A)'s findings, ultimately dismissing the revenue's appeal. The decision was announced in the open court in the presence of both parties' representatives on 01.07.2021.