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TMI Blog2024 (2) TMI 636X X X X Extracts X X X X X X X X Extracts X X X X ..... receipts do not form part of receipts for computation of income in section 44BB. Decided against revenue. - Dr. Brr Kumar, Accountant Member And Ms. Astha Chandra, Judicial Member For the Assessee : Shri Amit Arora Vishal Misra, CA For the Department : Shri Vizay B. Vasanta, CIT, DR ORDER PER ASTHA CHANDRA, JM The appeals filed by the Revenue are directed against the two separate orders dated 17.05.2023 and 18.05.2023 of the Ld. Commissioner of Income Tax (Appeals) 43, New Delhi ( CIT(A) ) pertaining to Assessment Year ( AY ) 2021-22 and 2020-21 respectively. Since common issues are involved in both the appeals, these were heard together and are being disposed of by this common order. 2. The Revenue has taken the following common grounds of appeal: 1. Whether the Ld. CIT(A) was correct in holding that reimbursement of service tax/GST shall not form part of receipts for the purpose of section 44B of the Income Tax Act, 1961 without appreciating the fact that section 44BB is a code in itself and there is clear distinction between the gross receipts in general and the gross receipts as per the provisions of section 44BB of the Act? 2. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oth the relevant AYs in favour of the assessee by observing and recording his findings as under: 5.3 During the course of proceedings in appeal, the appellant among other arguments has submitted that the judgements quoted by the Assessing Officer in the assessment order are not directly applicable to the facts of the case. Judgements quoted pertain to reimbursement of expense and inclusion of the same in the gross receipts of the assessee for the purposes of section 44BB. In the appellants case the matter in question is the inclusion of service tax/GST in the gross receipts for the purposes of 44BB. 5.4 The submissions of the appellant states that the case of the appellant is clearly covered by the judgement of CIT vs Mitchell Drilling International 380 ITR 130 of the honorable Delhi High Court. In this regard the decision of the honorable Delhi High Court has been examined. It has been held in the said order that service tax being a statutory levy would not form a part of the gross receipt for the purposes of section 4488 The relevant extract of the aforesaid judgement CIT versus Mitchell Drilling International Pty. Limited 380 ITR 130 is as under: 11. It is in thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion trading receipt 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 expo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee on account of provision of services in connection with exploration and production of mineral oil and hence, would not form part of aggregate taxable amount referred to in clauses (a) and (b) of sub- section(2) of section 44BB. Relevant extract of the judgement is as under: 56. Tax is required to be deducted at source, under Section 194-1 of the Act, with respect to income paid by way of rent. Likewise tax is required to be deducted at source under Section 194-J by the service recipient when fees are paid towards professional or technical services rendered by the service provider. It is only because service tax, on such payment, was not income has the CBDT, in its Circulars dated 28.04.2008 and 13.01.2014, directed that tax should be deducted at source only on the net amount, paid towards rent or as fees for services rendered by the service provider, Le, the total amount paid less service fox. The Circulars issues by the CBDT reflect is understanding that service tax paid by the assessee is not income . While it is true that, unlike Income computed in terms of sections 28 to 430 under Chapter IV of the Act, Section 44BB(2) is a special provision and requires ten pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f DCIT vs. M/s. Transocean Offshore International Ventures Ltd. in ITA No. 6174 6175/Del/2017 which were challenged by the Revenue before the Hon ble High Court of Uttrakhand in ITA No. 13, 17 of 2022 and the Hon ble High Court has dismissed the appeal of the Revenue. He further submitted that SLP filed by the Revenue in Transocean Offshore International Ventures Ltd. s case has also been dismissed by the Hon ble Supreme Court and hence now the issue stands settled in favour of the assessee. 7. The Ld. DR had no objection to the legal propositions and submissions of the Ld. AR. 8. We have heard the Ld. Representatives of the parties and perused the records. We find that the impugned issue, i.e. whether service tax/ GST being statutory levy is includible in the gross receipts for the purpose of section 44BB of the Act 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. In our view, the Ld. CIT(A) has rightly deleted the addition made by the Ld. AO relying on the decision of the Hon ble Delhi High Court in DIT vs. Mitchell Drilling Internationa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount paid on account of provision of services and facilities which must be deemed to be the income of the assessee under Section 44BB. It is only such amounts, which are paid to the assessee on account of the services and facilities provided by them, in the prospecting for or extraction or production of mineral oils, which alone must be deemed to be the income of the assessee. 23. Therefore, respectfully following the ratio of the judgment as laid down by the Hon'ble Delhi High Court and Hon'ble Uttarakhand High Court, we hold that the service tax receipts do not form part of receipts for computation of income in the section 44BB of the Income Tax Act. 8.2. The Revenue challenged the order of the Tribunal in ITA No. 6174 6175/Del/2017 before the Hon ble Uttrakhand High Court and the Hon ble Court dismissed the appeal of the Revenue observing that no fresh question of law arises for consideration in view of the judgement of this Court in Schlumberger Asia Services Ltd s case (supra). SLP of the Revenue challenging ITA No. 13 of 2022 in Transocean Offshore International Ventures Ltd. s case has also been dismissed by the Hon ble Supreme Court. 9. Thus, in lig ..... X X X X Extracts X X X X X X X X Extracts X X X X
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