2020 (8) TMI 412 - HC - Income Tax

Scope of Section 44BB - Amount of service tax being statutory levy, received by the appellant from its customers was to be included in calculating the aggregate amount referred to in sub-section (2) of Section 44BB of the Act? - HELD THAT - Substantial question of law has since been answered in DIRECTOR OF INCOME TAX INTERNATIONAL TAXATION, M/S SMITH INTERNATIONAL INC., M/S BAKER HUGHES SINGAPORE PTE, COMMISSIONER OF INCOME TAX INTERNATIONAL TAXATION 2019 (4) TMI 1177 - UTTARAKHAND HIGH COURT the substantial question of law therein was answered in favour of the assessee, and against the revenue, by holding that the amount reimbursed to the assessee (service provider) by the Oil and Natural Gas Corporation (service recipient), representing the service tax paid earlier by the assessee to the Government of India, would not form part of the aggregate amount referred to in clauses (a) and (b) of sub-section (2) of Section 44BB of the Act. - Decided in favour of the assessee and against the revenue.

Summary

Issues:
Interpretation of statutory levy in calculating aggregate amount under Section 44BB of the Act.

Analysis:
The High Court considered the substantial question of law regarding the inclusion of service tax amounting to a significant sum in the calculation of the aggregate amount under Section 44BB of the Act. The tribunal had erred in law by including the service tax amount received by the appellant from its customers in the calculation. However, the High Court referred to a previous order dated 12.04.2019 in a similar case where it was held that the amount reimbursed to the assessee by the service recipient, representing the service tax paid earlier by the assessee to the Government, should not be part of the aggregate amount under Section 44BB of the Act.

The learned counsels for both parties agreed that the substantial question of law had been resolved in favor of the assessee in the previous order mentioned. Consequently, the High Court answered the substantial question of law in favor of the assessee and against the revenue, following the precedent set in the earlier order. The judgment clarified that the service tax amount received by the appellant should not be included in the calculation of the aggregate amount under Section 44BB of the Act.

Based on the above analysis and the agreement between the counsels, the High Court disposed of the appeal, upholding the decision that the service tax amount received by the appellant from its customers is not to be considered in calculating the aggregate amount under Section 44BB of the Act. The judgment provided clarity on the interpretation of statutory levy in such calculations, ensuring consistency with previous decisions and legal principles.