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TMI Blog2016 (6) TMI 130X X X X Extracts X X X X X X X X Extracts X X X X ..... Anuj Arora, CIT DR For The Respondent : Shri Amit Arora, CA ORDER PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER The present appeal has been preferred by the Department against the impugned order dated 19.12.2013 passed by the Ld. CIT(A)-II, Dehradun for assessment year 2010-11. 2. The assessee is a non-resident company incorporated under the laws of Australia. During the year under consideration, it had offered revenues to taxation on account of ongoing contract dated 12.12.2006 entered with ONGC Ltd. for charter hire of a jack up rig. The operations of the assessee consisted of performing the drilling operations through provision of rig and integrated services. The assessee, in its return of income, had claimed that the taxable revenues were to be computed in terms of section 44BB of the Income Tax Act, 1961 (hereinafter called the Act ). During the course of scrutiny assessment proceedings, the Assessing Officer came to know that an amount of ₹ 114,351,759/- received on account of service tax had not been added to the gross revenue chargeable to tax u/s 44BB of the Act. It was the assessee s contention that statutory charges cannot form part of the amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce the receipts are offered to tax u/s 44BB of the Act which provides for computation of profits on gross basis, there is no scope for computing or re-computing the profits by excluding any element of the receipts from the total turnover as the same would amount to defeating the very purpose of providing for a scheme of simpler mode of computation of profits u/s 44BB of the Act and obviating the need for accounting for individual receipts and payments etc. 1.3 Whether the Ld.CIT (A) has erred in ignoring the ratio of the judgment in the case of M/s Chowringhee Sales Bureau (P) Limited (82 ITR 542, SC) wherein the Hon ble Apex Court has held that the Sales Tax collected by an assessee in the ordinary course of its business forms part of its business receipts. Owing to the inherent similarity in the nature if the sales tax and service tax, the ratio of the judgment in the said case is directly applicable in the facts of the instant case. 2. Whether on the facts and in the circumstances of the case and in law, the L( CIT(A) has erred in holding that the assessee is not liable to pay interest u/s 234B of the Act and in observing that the issue is covered in favour of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arges [2009] 181 TAXMAN 46 (UTTARAKHAND) Ensco Maritime Ltd. Reimbursement of catering Charges [2009] 181 TAXMAN 144 (UTTARAKHAND) RBF Rig Corporation Reimbursement fuel expenses (2008) 170 Taxman 459(UTTARAKHAND) Sedco Forex International Inc. Mobilization charges [2008] 170 TAXMAN 286 (UTTARAKHAND) B.J. Services Co. Middle East Reimbursement of cost of spare parts 5. The Ld. DR submitted that service tax receipts need to be included in aggregate amount brought to tax under section 44BB because: (i) Section 44BB is a self contained code providing for computation of profits at a fixed percentage of gross receipts of the assessee and all the deductions, exemptions and exclusions from income are deemed to have been allowed; (ii) It is open to those who want to claim deductions, exemptions and exclusions in assessment to opt to proceed under section 44BB (3). (iii) Once the receipts are offered to tax u / s 44BB (1) (2), which provides for computation of profits on gross basis, there is no scope for com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tory liability. It is also to be categorised as contractual liability whereby the 'service receiver' agrees to bear this expense and accordingly pays the 'service provider' (assessee). It was submitted that it is the practice in the oil and gas industry to contractually bind the 'service receiver' to bear this expense. Thus, it is a matter of contract (implicit or explicit) between the parties because it is improbable / impossible that 'service receiver' will agree to reimburse a liability which is specifically that of the service provider (assessee). 8. On the levy of interest u/s 234B/C, it was the submission of the Ld. DR that the issue was consequential and the quantum of interest has to be essentially worked out by the Assessing Officer. 9. The Ld. AR, in response, submitted that the issue of service tax is covered by the decision of the Hon'ble Delhi High Court in the case of DIT vs Mitchell Drilling International Pty. Limited in I.T.A. No. 403/2013 wherein the Hon'ble Delhi High Court in its decision dated 28.09.2015 has dealt the issue at length. He submitted that in view of the recent judgment of the Hon ble Delhi High Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sections 43 and 43A to assessments under Section 44 BB. It introduces the concept of presumptive income and states that 10% credit of the amounts paid or payable or deemed to be received by the Assessee on account of the provision of services and facilities in connection with, or supply of plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils in India shall be deemed to be the profits and gains of the chargeable to tax. The purpose of this provision is to tax what can be legitimately considered as income of the Assessee earned from its business and profession. 10. The expression amount paid or payable in Section 44 BB (2) (a) and the expression amount received or deemed to be received in Section 44 BB (2) (b) is qualified by the words on account of the provision of services and facilities in connection with, or supply of plant and machinery. Therefore, only such amounts which are paid or payable for the services provided by the Assessee can form part of the gross receipts for the purposes of computation of the gross income under Section 44 BB (1) read with Section 44 BB (2). 11. It is in this contex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eipt or turnover in the said decisions was determined by the context. The later decision of the Supreme Court in CIT v. Lakshmi Machine Works (supra) which sought to interpret the expression turnover was also in another specific context. There the question before the Supreme Court was whether excise duty and sales tax were includible in the total turnover which was the denominator in the formula contained in Section 80 HHC (3) as it stood in the material time? The Supreme Court considered its earlier decision in Chowringhee Sales Bureau (supra) and answered the question in the negative. The Supreme Court noted that for the purposes of computing the total turnover for the purpose of Section 80 HHC (3) brokerage, commission, interest etc. did not form part of the business profits because they did not involve any element of export turnover. It was observed: just as commission received by an assessee is relatable to exports and yet it cannot form part of turnover , excise duty and sales-tax also cannot form part of the turnover . The object of the legislature in enacting Section 80 HHC of the Act was to confer a benefit on profits accruing with reference to export ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of rent paid/payable without including the service tax. In Circular No. 1/2014 dated 13th January 2014, it has been clarified that service tax is not to be included in the fees for professional services or technical services and no TDS is required to be made on the service tax component under Section 194J of the Act. 19. The question framed, is therefore, answered in the negative i.e. favour of the Assessee and against the Revenue. 11. Therefore, respectfully following the ratio of the judgment as laid down by the Hon'ble Delhi High Court, we dismiss ground nos. 1, 1.1, 1.2 and 1.3 of the Revenue. 12. On the issue of levy of interest u/s 234B/234 C of the Act, we restore the issue to the file of the Assessing Officer to examine the liability of the assessee in light of the fact that all receipts are to be assessed u/s 44BB of the Act after giving effect to relief confirmed for the assessee in this appeal. Accordingly, ground nos. 2, 2.1 and 2.2 are allowed for statistical purposes. 13. In the result, the appeal of the Department is partly allowed for statistical purposes. Order pronounced in the Open Court on 29th of April, 2016. - - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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