9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2024 (11) TMI 954 - AT - Income TaxGST amount considered for the purpose of computing presumptive income u/s. 44B - Applicability of Section 145A in computing deemed income under Section 44B - HELD THAT - Section 44B is a special provision for computing profits and gains of shipping business in the case of non-residents. Prior to insertion of Section 44B, taxable profits of foreign shipping enterprises were determined by suitably apportioning their global profits between their Indian business and foreign business or on the basis of voyage accounts which led to difficult and complicated issues in assessments. With a view to simplifying and rationalizing the assessments in such cases, Section 44B was inserted for computing profits and gains of shipping business in the case of non- residents at 7.5% of specified amounts. Insertion of Section 44B substituted computation as per normal provisions in which both debit of expenses and credit of income were considered. Interpretation of Section 145A inserted by the Finance Act 2018 with retrospective effect from 01/04/2017 on the issue of applicability of income computation and disclosure standards - Ergo, amendment to Section 145A was to include taxes of cost of sales / services for valuation of inventory to align with ICDS-2 and nowhere it can be inferred that it tantamount to change the computation mechanism on presumptive basis of taxation. Earlier Section 145A was inserted to bring clarity with the method of accounting for valuation of purchase and sale of goods and inventory, to determine business income. Section 145A of the Act takes into consideration valuation of sale or purchase of goods/services and of inventory , whereas Section 44B (2) considers specified amounts i.e. amount paid or payable on account of the carriage of goods shipped at any port in India and amount received or deemed to be received on account of the carriage of goods shipped at any port outside India. The terms amount paid or payable' and 'amount received or deemed to be received mentioned under Section 44B cannot be replaced with the term 'valuation' in the absence of any specific enabling provisions under Section 44B or Section 145A of the Act or any other provisions of the Act. For instance, Section 50CA is a deeming provision which enables replacement of consideration with 'fair market value' where the amount of consideration is less than the fair market value determined in a prescribed manner. Thus, in our view adding GST component to the deemed income which has to be computed directly on specified amounts i.e. amount paid or payable on account of carriage of goods shipped which is revenue element only. For the earlier regime of service tax prior to GST, there were various judicial precedents which upheld exclusion of service tax while computing the provision u/s. 44B or other similar provisions. Full Bench of Hon ble High Court of Uttarakhand in case of DIT v. Schlumberger Asia Services Ltd 2019 (4) TMI 1177 - UTTARAKHAND HIGH COURT held that service tax paid earlier by the assessee to Government of India is not on account of provision of services in connection with exploration and production of mineral oil, hence would not form part of aggregate taxable amount referred to in clauses (a) and (b) of sub-section(2) of section 44BB.'On perusal of the comparison of the relevant provision of service tax law and GST law it can be seen that both are indirect taxes and is recovered by the service provider on behalf of assessee and as an agent of the Government as such rates are specified and thus, the provision under the service tax law are similar to provision of GST law and therefore, in our opinion the judicial precedents delivered in respect of erstwhile tax law would apply mutatis mutandis to the GST laws also. GST being a mandatory 'statutory levy cannot be said to be in the nature of 'charges' by the shipping Company towards the carriage. The incidence of GST is on account of taxability of services under the relevant parliamentary statute i.e., GST laws and not on account of the business activities as envisaged in Sections 44B(2)(i) and 44B(2)(ii) of the Act. Otherwise, including GST in gross receipts for purpose of section 44B would be akin to charging income tax on GST i.e., tax on tax, which would promote cascading effect which cannot be the intent of legislation. A service provider acts in a fiduciary capacity out of statutory obligation casted upon it, while collecting service tax/GST on the behalf of exchequer and the same is ultimately deposited with the exchequer, hence there cannot be any iota of doubt that the impugned GST is not in the nature of specified income under Section 44B. As argued amendment in the provisions of Section 145A of the Act brought by Finance Act 2018, since it includes services within its code therefore, income has to be computed in accordance with Section 145A and any taxes levied under services is included - If it is held that Section 145A are applicable for computing deemed income u/s.44B and GST is added to the specified amounts and provisions of Section 29 are invoked, then deduction of GST paid should be allowed while computing income under the head profits and gains of business or profession as per Section 43B. Even otherwise also Section 44B over rights Section 28-43A and 43B and therefore, in case if department seeks to add GST on the turnover for the purpose of calculating the profit u/s.44B, then, deduction u/s.43B has to be allowed if it is paid on or before the due date and similarly it can be disallowed once GST has not been paid within the due date. However, this is purely academic, contention which has been raised because we have already held that for the purpose of Section 44B only specified amount mentioned in the sub-Section 2 of Section 44B alone is the subject matter of computation of profit @7.5% and Section 145A has no applicability. Thus we hold that while computing income u/s.44B, GST cannot be included. Thus, in our opinion, the minority view of the single member of the DRP is to be upheld that GST cannot be included while computing deemed income u/s.44B, accordingly, this issue is decided in favour of the assessee. Computing of book profit u/s.115JB - Since assessee has offered income of operation of ships to tax under the deemed provisions of Section 44B r.w.s.90(2) and Article 8 of India-Hong Kong Tax Treaty. Thus, in view of the Explanation 4A to Section 115JB(1), the provisions of Section 115JB are not applicable to the assessee. Short grant of tax deducted at source and credit of advance tax - As been stated that assessee has filed rectification application before the ld. AO which has not been disposed of. Accordingly, we direct the ld. AO to examine this issue and decide accordingly.
Issues Involved:
1. Inclusion of GST in the computation of presumptive income under Section 44B of the Income Tax Act. 2. Application of Section 145A and its impact on the computation of income. 3. Applicability of Section 115JB concerning book profits. 4. Short grant of tax deducted at source and credit of advance tax. 5. Erroneous levy of interest and fee. Issue-wise Analysis: 1. Inclusion of GST in Section 44B Computation: The primary issue was whether GST should be included in the gross receipts for computing presumptive income under Section 44B. The assessee argued that GST, like service tax, does not form part of the income as it is collected on behalf of the government. The Tribunal agreed, citing past judgments and the principle that taxes collected do not have an income element and should not be included in gross receipts. The Tribunal upheld the minority view of the DRP that GST should not be included, aligning with past decisions that service tax is not part of gross receipts under Section 44B. 2. Application of Section 145A: The Tribunal examined the amendment to Section 145A, which includes services for valuation purposes. However, it concluded that Section 145A pertains to the valuation of inventory and does not alter the presumptive computation under Section 44B. The Tribunal emphasized that Section 44B, with its non-obstante clause, overrides other provisions, including Section 145A, and thus GST should not be included in the deemed income computation. 3. Applicability of Section 115JB: The Tribunal addressed the computation of book profits under Section 115JB, noting that the assessee's income from the operation of ships is taxed under Section 44B and Article 8 of the India-Hong Kong Tax Treaty. Consequently, the provisions of Section 115JB were deemed inapplicable, and the book profit computation by the AO was deleted. 4. Short Grant of Tax Deducted at Source and Credit of Advance Tax: The assessee raised concerns about the short grant of TDS and advance tax credit. The Tribunal acknowledged that a rectification application was pending with the AO and directed the AO to examine and resolve the issue. 5. Erroneous Levy of Interest and Fee: The Tribunal noted that the issue regarding the erroneous levy of interest and fee was consequential to the main issues and would be addressed accordingly. Conclusion: The appeal was allowed, with the Tribunal ruling in favor of the assessee on the primary issue of GST inclusion under Section 44B, affirming that GST should not be included in gross receipts for presumptive income computation. The Tribunal also resolved related issues concerning Section 115JB and directed the AO to address pending rectification applications regarding TDS and advance tax credits.
|
