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2022 (9) TMI 354 - AT - Income TaxDeemed taxable income u/s. 44BBA - Computing profits and gains of business of operation of aircraft in the case of non-residents - whether this service tax component is includible in the gross receipts for computing the deemed taxable income u/s. 44BBA? - assessee is a non-resident engaged in the business of operation of airlines and is subjected to income tax under the Act on presumptive basis in terms of section 44BBA - HELD THAT - Where an assessee who is a non-resident and is engaged in the business of operation of aircraft, a sum equal to 5% of the aggregate of amount paid or payable to the assessee on account of carriage of passengers, live stock material or goods from any place in India and the amount received or deemed to be received in India by or on behalf of the assessee on account of carriage of passengers, live stock material or goods from any place outside India, shall be deemed to be the profit and gains of such business chargeable to tax. We also note that the expression amount paid or payable in section 44BBA(2)(a) and the expression amount received or deemed to be received in section 44BBA(2)(b) is qualified by the words on account of the carriage of passengers, live stock material or goods from any place in India/outside India . Therefore, in our considered understanding, only such amounts which are paid or payable for the service provided by the assessee can form part of the gross receipts for the purpose of computation of gross total income u/s. 44BBA(1). We also note and agree with the submission made by the Ld. Counsel for the assessee that service tax collected by the assessee does not have any element of income, it is collected by the assessee from its customers for and on behalf of the Central Government on account of a statutory levy and, therefore, it does not form part of the receipts of the assessee on which income accrues or arises to it. We are in agreement with the contention of the Ld. Counsel for the assessee that assessee merely acts as a collection agent for and on behalf of the Central Government and after collection, deposits the service tax so collected into the treasury of the Central Government. As in Sedco Forex International Inc. 2017 (11) TMI 78 - SUPREME COURT was paid mobilization fees from ONGC which was included by the Ld. AO as part of gross receipts for the purpose of section 44BB. Hon ble Supreme Court has observed that mobilization fees is a fixed amount that might be less or more than the actual expenses incurred and contract in question being indivisible one, held that amount received by the assessee as mobilization fee was to be included in gross receipts for computing the deemed profits u/s. 44BB. Thus, the facts of this case are distinguishable from the facts in the present case before us since Hon ble Supreme Court dealt with the issue of inclusion of mobilization fees arising out of the commercial terms, in the gross receipts whereas in the present case before us, the issue relates to inclusion of service tax component in the gross receipt which is a statutory levy collected for and on behalf of the Central government by the assessee. CIT, DR has contended that deduction of expenses is not available from the receipts u/s. 44BBA which in our considered understanding is not tenable since assessee has not claimed service tax component as an expenses deduction. Considering the facts on record, provisions of section 44BBA of the Act, the decision of Hon ble High Court of Delhi in Mitchell Drilling International Pvt. Ltd. 2015 (10) TMI 259 - DELHI HIGH COURT as well as the position clarified by CBDT in its two circulars we do not find any reason to interfere with the finding and decision given by the CIT(A) and accordingly, dismiss the ground taken by the revenue on the issue under consideration. Accordingly, the appeal of the revenue is dismissed.
Issues Involved:
1. Whether service tax amounting to Rs.89,12,89,825/- forms part of the gross receipts of the assessee for the purpose of computing its total income on a presumptive basis under section 44BBA of the Income-tax Act, 1961. Issue-wise Detailed Analysis: 1. Inclusion of Service Tax in Gross Receipts under Section 44BBA: The primary issue raised by the revenue pertains to whether the service tax collected by the assessee should be included in the gross receipts for computing total income on a presumptive basis under section 44BBA of the Income-tax Act, 1961. The assessee, a non-resident company engaged in the airline business, filed its return of income on a presumptive basis under section 44BBA. During assessment, the Assessing Officer (AO) included the service tax collected by the assessee in the gross receipts, thereby increasing the total income. Assessee's Argument: The assessee argued that service tax collected from customers does not form part of its gross receipts since it is collected in a fiduciary capacity on behalf of the Central Government. The service tax is a statutory levy with no profit element embedded in it. The assessee cited various judicial precedents to support its claim, including: - DIT Vs. Mitchell Drilling International Pvt. Ltd. (2016) 380 ITR 130 (Del.) - Islamic Republic of Iran Shipping Lines Vs. DCIT (2011) 46 SOT 101 (Mum. Trib.) - DIT Vs. M/s. Schlumberger Asia Service Ltd. (2009) 317 ITR 156 (Uttarakhand HC) CIT(A)'s Decision: The Commissioner of Income-tax (Appeals) [CIT(A)] accepted the assessee's contention, holding that service tax collected by the assessee in a fiduciary capacity for the Central Government does not form part of the gross receipts for the purpose of section 44BBA. The CIT(A) relied on the decision of the Delhi High Court in Mitchell Drilling International Pvt. Ltd., which held that service tax collected does not constitute income and should not be included in gross receipts for computing presumptive income under section 44BB, a provision similar to section 44BBA. Revenue's Argument: The revenue, represented by the CIT, DR, argued that section 44BBA opens with a non-obstante clause, overriding the general computation mechanism and denying deductions for expenses. The revenue contended that the term "amount" in section 44BBA is absolute and inclusive of all payments received by the assessee, including service tax. The revenue cited the Supreme Court decision in SEDCO Forex International Inc. Vs. CIT (2017) 87 taxmann.com 29 (SC), which dealt with the inclusion of certain receipts under section 44BB, to support its argument. Tribunal's Analysis: The Tribunal noted that section 44BBA deems 5% of the aggregate amounts paid or payable to the assessee for the carriage of passengers, livestock, mail, or goods as the profits of the business chargeable to tax. The Tribunal emphasized that service tax collected by the assessee does not have any element of income and is collected on behalf of the Central Government. The Tribunal agreed with the CIT(A) and the Delhi High Court's decision in Mitchell Drilling International Pvt. Ltd., which clarified that service tax is not an amount received for services rendered by the assessee but is collected for the government. Conclusion: The Tribunal concluded that service tax collected by the assessee should not be included in the gross receipts for computing deemed taxable income under section 44BBA. The Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s decision to exclude the service tax component from the gross receipts. Final Judgment: The appeal of the revenue was dismissed, and the order of the CIT(A) was upheld, confirming that service tax collected by the assessee does not form part of the gross receipts for the purpose of computing income under section 44BBA of the Income-tax Act, 1961.
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