2018 (5) TMI 2139 - AT - Income Tax

Maintainability of appeal - Assessment of appellant on a protective basis - AOP - order is passed by AO on the alleged Association of Persons ( AoP ) of SASL and not against the Appellant (ie SASL) - HELD THAT - At the very outset the counsel for the assessee pointed out that impugned issue stand decided in favour of the assessee and against the revenue by the order of the bench in assessee s own case 2018 (3) TMI 1599 - ITAT NEW DELHI Thus respectfully following the decision of Hon ble Delhi High Court in the case of Linde AG Linde Engineering Division vs. DDI ( 2014 (4) TMI 975 - DELHI HIGH COURT we hold that Consortium Agreement dated 04/05/03 between Slumberger Asia Services Ltd and Transocean Offshore Deep water Drilling Pvt. Ltd., do not constitute an AOP. Transocean Offshore Deepwater Drilling Inc. being consortium member has rightly offered to tax the receipts u/s 44BB in the return of income. Gross receipts for the purposes of Section 44 BB - presumptive income - As decided in TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. C/O. NANGIA AND COMPANY 2018 (2) TMI 53 - ITAT DELHI for the purposes of computing the 'presumptive income' of the assessee for the purposes of Section 44 BB of the Act, the service tax collected by the Assessee on the amount paid is for rendering services is not to be included in the gross receipts in terms of Section 44B (2) read with Section 44 BB (1). The service tax is not and amount paid or payable, or received or deemed to be received by the Assessee for the services rendered by it. The only collecting the service tax for passing it on to the Government. The Court further notes that the position has been made explicit by the CBDT itselfin two of its circulars. In Circular No. 4/2008 dated 28th April 2008 it was clarified that Service tax paid by the tenant doesn t partake the nature of income of the landlord. The landlord only acts as a collecting agency for Government for collection of Service Tax. Therefore, it has been decided that tax deduction at source) under sections 194-I of Income Tax Act would be required to be made on the amount of rent paid/payable without including the service toot. In Circular No. 1/2014 dated 13th January 2014, it has been clarified that service tax is not to be included in the fees for professional services or technical services and no TDS is required to be made on the service tax component under Section 194 J of the Act. Appeal of assessee allowed.

Summary

Issues involved:
- Maintainability of appeal by the assessee
- Dismissal of appeal by CIT(A) based on prior order
- Failure to address grounds of appeal by CIT(A)
- Decision in favor of assessee based on previous order
- Application of tax provisions regarding technical services and mineral oil extraction
- Interpretation of presumptive income under Section 44BB
- Inclusion of service tax in gross receipts for presumptive income calculation
- Reimbursement of customs duty in gross receipts calculation
- Circulars by CBDT on service tax treatment
- Dismissal of revenue's appeal based on previous findings

Analysis:
1. The judgment involves multiple appeals related to different assessment years and parties, which were heard together due to common issues. The main grievance in the assessee's appeal was about the maintainability of the appeal and the dismissal by the CIT(A) based on a prior order concerning an alleged Association of Persons (AoP). The coordinate bench had previously ruled in favor of the assessee in a similar case, which was cited as a precedent to allow the appeals filed by the assessee.

2. The decision also delves into the tax provisions related to technical services and mineral oil extraction, citing relevant court judgments to support the interpretation. It was established that prospecting for or extraction of mineral oil does not fall under technical services for tax purposes, aligning with the Supreme Court's decision on the matter.

3. A significant part of the judgment revolves around the interpretation of presumptive income under Section 44BB of the Income Tax Act. The court analyzed the inclusion of service tax in gross receipts for calculating presumptive income, drawing parallels with previous legal precedents and circulars issued by the CBDT. The court concluded that service tax collected by the assessee should not be considered as part of gross receipts for presumptive income calculation under Section 44BB.

4. Furthermore, the judgment addressed the treatment of reimbursement of customs duty in the gross receipts calculation under Section 44BB, aligning with a High Court decision on the matter. The court's decision was influenced by the CBDT circulars clarifying the treatment of service tax in income calculations, leading to the dismissal of certain grounds in the assessee's appeal and the revenue's appeal based on previous findings.

5. Ultimately, the appeals filed by the assessee were allowed, while the revenue's appeal was dismissed in line with the findings of the coordinate bench and the decisions made regarding the various issues raised in the appeals.