2018 (4) TMI 1263 - AT - Income Tax

Determination of income for taxable purpose u/s 44BB - computation of gross receipts - service tax element inclusion in gross receipts - Held that - as decided in assessee s own case 2012 (9) TMI 564 - ITAT DELHI Service tax collected by the assessee shall not form part of the gross receipts for the purpose of determining income for taxable purpose u/s 44BB. Also See Income-tax vs. Mitchell Drilling International Pvt. Ltd. 2015 (10) TMI 259 - DELHI HIGH COURT - Decided in favour of assessee

Summary

Issues:
1. Whether service tax receipts are includible in gross revenue for computation of profits under section 44BB of the Income-tax Act, 1961.

Analysis:
The Appellate Tribunal ITAT Delhi heard consolidated appeals concerning the inclusion of service tax receipts in gross revenue for profit computation under section 44BB of the Income-tax Act, 1961. The appeals were filed by two taxpayers challenging the orders passed by the Assessing Officer (AO) and the Dispute Resolution Panel (DRP). The key contention was whether service tax receipts should be considered part of gross revenue for determining taxable income under section 44BB. The taxpayers argued that once receipts are offered to tax under section 44BB, excluding any part of the receipts from total turnover would defeat the purpose of the presumptive taxation scheme. They relied on a judgment by the Hon'ble Delhi High Court which held that service tax collected by an assessee does not form part of gross receipts for computing presumptive income under section 44BB.

The Tribunal considered the arguments presented and referred to the decision in the case of Director of Income-tax vs. Mitchell Drilling International Pvt. Ltd. where it was clarified that service tax collected by the assessee does not constitute income and should not be included in gross receipts for computing presumptive income under section 44BB. The Tribunal noted that the Central Board of Direct Taxes (CBDT) circulars also supported this interpretation. Therefore, based on the precedent set by the Delhi High Court and the Tribunal's previous decision in the taxpayer's case for AY 2008-09, the Tribunal ruled in favor of the taxpayers. The service tax collected by the assessee was deemed not part of gross receipts for determining taxable income under section 44BB. Consequently, the appeals were dismissed, affirming that service tax receipts should not be included in gross revenue for profit computation under section 44BB.

In conclusion, the Tribunal's judgment clarified the treatment of service tax receipts in the context of computing taxable income under section 44BB. The decision aligned with the interpretation that service tax collected by the assessee should not be considered as part of gross receipts for determining presumptive income. The ruling was based on legal precedents and CBDT circulars, ensuring consistency in tax treatment across similar cases.