2024 (9) TMI 13 - AT - Income Tax

Revenues taxable u/s 44BB(2) - including service-tax/GST receipts in the receipts taxable - whether service tax is includable in the gross revenue for computing profits under presumptive provisions of section 44BB or not? - assessee is a non-resident company. HELD THAT - As decided in own case in the assessee s own case for the AY 2012-13 2021 (11) TMI 1201 - ITAT DELHI it is seen that the issue of excludability of service tax in the gross receipts is squarely covered by the judgment of Mitchell Drilling International Pty Limited 2015 (10) TMI 259 - DELHI HIGH COURT wherein has held that service tax being statutory levy should not form part of gross receipts as per provisions of section 44BB. Thus we hold that the service tax receipts do not form part of receipts for computation of income in the section 44BB. Thus addition is hereby deleted.

Issues Involved:
1. Passage of Final Assessment Order without following the directions of the Hon'ble DRP.
2. Inclusion of service-tax/GST receipts in the taxable receipts under section 44BB(2) of the Act.
3. Non-allowance of brought forward losses.
4. Restriction of credit of Taxes Deducted at Source (TDS).
5. Levy of penalty under section 270A for misreporting and underreporting income.

Issue-wise Detailed Analysis:

1. Passage of Final Assessment Order without following the directions of the Hon'ble DRP:
The assessee contended that the Final Assessment Order passed by the Assessing Officer (AO) under section 143(3) read with section 144C(13) was illegal and non-est as it did not follow the binding directions of the Dispute Resolution Panel (DRP). This was considered a clear violation of the provisions of Section 144C(13).

2. Inclusion of service-tax/GST receipts in the taxable receipts under section 44BB(2) of the Act:
The core issue was whether service tax is includable in the gross revenue for computing profits under the presumptive provisions of section 44BB of the Income Tax Act, 1961. The Tribunal referenced its own decision in the assessee's case for AY 2012-13, where it was held that service tax being a statutory levy should not form part of gross receipts as per section 44BB. The Tribunal cited the Hon'ble Delhi High Court's decision in DIT vs. Mitchell Drilling International Pty. Limited and the Hon'ble Uttarakhand High Court's decision in DIT vs. Schlumberger Asia Services Ltd., which supported the exclusion of service tax from gross receipts. The Tribunal concluded that service tax receipts do not form part of receipts for computation of income under section 44BB, thereby deleting the addition made by the AO.

3. Non-allowance of brought forward losses:
The assessee claimed brought forward losses of INR 19,24,30,051 in its income-tax return, which the AO did not allow. Both parties agreed to remand this issue to the AO for verification and appropriate action.

4. Restriction of credit of Taxes Deducted at Source (TDS):
The AO restricted the credit of TDS to INR 7,00,42,148 against the assessee's claim of INR 7,74,25,916. Similar to the brought forward losses issue, both parties agreed to remand this issue to the AO for verification and appropriate action.

5. Levy of penalty under section 270A:
The AO initiated penalty proceedings under section 270A, alleging that the assessee misreported and underreported particulars of income. The Tribunal did not provide a detailed analysis of this issue in the judgment text provided.

Conclusion:
The Tribunal allowed the appeals of the assessee for statistical purposes, primarily remanding issues related to brought forward losses and TDS credit to the AO for verification. The Tribunal upheld the exclusion of service tax from gross receipts under section 44BB, aligning with precedent cases. The judgment was pronounced in the open court on 01/02/2024.

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