2024 (2) TMI 636 - AT - Income Tax

Computing the presumptive income for the purposes of Section 44BB - Service tax/ GST being statutory levy inclusion in the gross receipts for the purpose of section 44BB or not? - HELD THAT - This issue has been considered by various Hon ble High Courts (including the Hon ble jurisdictional High Court of Delhi) and Tribunals. The impugned issue stands settled in favour of the assessee - CIT(A) has rightly deleted the addition made by the Ld. AO relying on the decision of Mitchell Drilling International Pvt. Ltd 2015 (10) TMI 259 - DELHI HIGH COURT and Schlumberger Asia Services Ltd. 2019 (4) TMI 1177 - UTTARAKHAND HIGH COURT We have also perused the decision of Dehradun Bench of the Tribunal in DCIT vs. M/s. Transocean Offshore International Ventures Ltd 2021 (11) TMI 1179 - ITAT DELHI wherein the Tribunal relying on the decisions (supra) in Mitchell Drilling International Pvt. Ltd. and Schlumberger Asia Service Ltd. held that the service tax receipts do not form part of receipts for computation of income in section 44BB. Decided against revenue.

Summary

Issues Involved:
1. Whether the reimbursement of service tax/GST should form part of receipts for the purpose of section 44BB of the Income Tax Act, 1961.
2. Whether the income under section 44BB should be computed after considering all expenses from section 30 to 43B as deemed allowed.

Summary:

Issue 1: Reimbursement of Service Tax/GST and Section 44BB

The Revenue contended that the reimbursement of service tax/GST should be included in the gross receipts for computing income under section 44BB of the Income Tax Act, 1961. The assessee, a non-resident foreign company, argued that service tax/GST being a statutory levy should not form part of the gross receipts. The CIT(A) ruled in favor of the assessee, referencing the Delhi High Court's decision in CIT vs. Mitchell Drilling International 380 ITR 130, which held that service tax collected by the assessee and passed on to the government does not form part of gross receipts for the purpose of section 44BB. The Tribunal upheld the CIT(A)'s decision, noting that various High Courts and Tribunals, including the Delhi High Court and Uttarakhand High Court, have consistently ruled that service tax/GST receipts are not includible in gross receipts for section 44BB purposes. The Tribunal cited the Supreme Court's dismissal of the Revenue's SLP in a similar case, affirming the settled legal position.

Issue 2: Computation of Income Under Section 44BB

The Revenue argued that income under section 44BB should be computed at 10% of the gross receipts/revenue, considering all expenses from section 30 to 43B as deemed allowed. The CIT(A) and the Tribunal found that the inclusion of service tax/GST in gross receipts was not warranted, thereby negating the need to address the computation method under section 44BB further. The Tribunal affirmed that the CIT(A) rightly deleted the addition made by the AO based on the established legal precedents.

Conclusion:

The Tribunal dismissed the Revenue's appeals for both AYs 2020-21 and 2021-22, upholding the CIT(A)'s decision that service tax/GST receipts are not includible in gross receipts for the purposes of section 44BB of the Income Tax Act, 1961.

Order Pronounced:

Order pronounced in the open court on 9th February, 2024.