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TMI Blog2016 (6) TMI 1320X X X X Extracts X X X X X X X X Extracts X X X X ..... round No.2: That based on the facts and circumstances of the case, the Ld. Commissioner of Income-tax, Appeals-1-, Mumbai (CIT) erred in upholding the order of the AO that receipts of Rs. 7,645,919/- on account of VAT were includible in the gross receipts for the purpose of determining income under section 44BB of the Income-Tax Act, 1961. 2. The brief facts of the case are that the assessee having its registered office in Bermuda and its project Office in Mumbai. The assessee is engaged in the business of providing services and facilities in connection with exploration, exploitation and production of mineral oil in India, filed its return of income in the relevant AY declaring total income of Rs. 55,54,53,897/-. The return of income was selected for scrutiny. While framing the assessment, the Assessing Officer (AO) make the addition of Service Tax of Rs. 22,13,77,861/- and Rs. 76,45,919/- on account of VAT as a part of income of assessee vide assessment order dated 09.02.2012 u/s. 44B of the Act. Aggrieved by it, the assessee preferred appeal before the CIT(A) but without any success, thus approached us by way of second appeal. 3. We have heard Ld. Authorised Representative (AR) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e expression 'amount paid or payable' in Section 44BB(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 (l) read with Section 44BB(2). 11. It is in this context that the question arises whether the service tax collected by the Assessee and passed on to the Government from the person to whom it has provided the services can legitimately be considered to form part of the gross receipts for the purposes of computation of the Assessee's 'presumptive income' under Section 44BB of the Act? 12. In Chowringhee Sales Bureau (supra) sales tax III the sum of Rs. 32,986 was collected and kept by the Assessee in a separate 'sales tax collection account'. The question considered by the Supreme Court was: 'Whether on the facts and in the circumstances of the case the sum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egative. 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 turnover. Therefore, "turnover" was the requirement. "Commission, rent, interest etc. did not involve any turnover." It was concluded that 'sales tax and excise duty' like the aforementioned tools like interest, rent etc. 'also do not have any element of 'turn over". 15. In CIT v. Lakshmi Machine Works (supra), the Supreme Court approved the decision of the Bombay High Court in CIT v. Sudarshan Chemicals Industries Ltd. (supra) which in turn considered the decision of the Supreme Court in George Oakes (P) Ltd. (supra). In the considered view of the Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receipt in terms of sub section 44BB(2) and 44BB(1) of the Act and concluded that Service Tax is not an amount paid or payable or received or deemed to be received by the assessee for the services rendered by it and the assessee is only collecting the service tax for passing it to be Government, the Hon'ble Delhi High Court also considered the Circular No. 4/2008 dated 28.04.2008 of the CBDT which clarifies that the service tax paid by the tenant does not pertake a nature of the income of the landlord and that landlord only collecting tax for government for collecting income tax. In Oceaneering International GMBH (supra), the Co-ordinate Bench of this Tribunal while considering the issue, whether service tax collected by the assessee-company does not have any element of income and cannot be form part of the gross receipt for the purpose of computing the presumptive income of the assessee u/s. 44BB of the Act and after considering the almost identical fact answered the issue in favour of the assessee, the Co-ordinate Bench while considering the element of income has considered that in paragraph no. 17 to 19 of its judgment which is reproduced for better appreciation of the facts a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in case of China Shipping Container (ITA No. 8516/2010) dated 23.08.2013 reported viz. 38 taxman.com 2( Mumbai-Trib.) was different to the dispute involving the present appeal. In China shipping container (supra) the coordinate bench of this tribunal was considering the ground related with section 44B of the act, wherein the present case is related with section 44BB of the Act. 6. From the above legal discussion we may conclude that both the grounds raised in the present appeal are squarely covered by the decision of the Delhi High Court in Mitchell Drilling International Pvt. Ltd (supra). The ratio of decision of Uttrakhand High Court in Halliburton Offshore Services Inc are entirely different. We may also refer the decision of Hon'ble Apex Court in CIT Versus Vegetable Products Ltd (88 ITR 192) , wherein it was held that if two reasonable constructions of taxing provision are possible, the construction which favours the assessee must be adopted. With utmost regards to the decision of Uttrakhand High Court, the decision of Delhi High Court in Michelle Drilling International Private Ltd (supra) directly covers the issue involved in the present appeal. Hence, following the decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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