This case deals with the issue of whether GST/service tax amount ...

Should GST/Service Tax Be Included in Gross Receipts for Offshore Drilling Income Calculations u/s 44BB?

September 18, 2024

Case Laws     Income Tax     AT

This case deals with the issue of whether GST/service tax amount should be included while computing the gross receipts u/s 44BB for a non-resident company engaged in offshore oil well drilling services. The key points are: The non-resident assessee entered into a contract with ONGC for charter hire of a drilling rig. The issue was whether GST/service tax collected from ONGC should be included in computing presumptive income u/s 44BB. CBDT circulars clarified that service tax should be excluded while computing income for TDS deduction on rent paid to residents. This principle was applied to non-residents as well, as Section 44BB intends to tax only the amount paid/payable at 10% for such business activities. The word 'amount' cannot include GST/service tax collected from customers and paid to the government. Section 44BB is a special provision to compute profits from mineral oil exploration business, considering only receipts in the nature of income, not service tax collected. The Uttarakhand High Court in Schlumberger's case held that service tax reimbursement should not be included in Section 44BB computation. The Delhi ITAT in McDermott's case also held that service tax component does not form part of receipts for Section 44BB computation. The ITAT ruled in favor of the assessee, excluding.

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