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Tribunal excludes service tax from profit calculation under Income Tax Act for 2007-08 The Tribunal allowed the appeal, setting aside the assessment order under sections 144C(13) and 143(3) for the assessment year 2007-08. It held that ...
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Tribunal excludes service tax from profit calculation under Income Tax Act for 2007-08
The Tribunal allowed the appeal, setting aside the assessment order under sections 144C(13) and 143(3) for the assessment year 2007-08. It held that service tax should not be included in revenue for profit computation under section 44B of the Income Tax Act, 1961, based on the nature of service tax as a statutory liability without a profit element, as established in previous rulings and the case of Islamic Republic of Iran Shipping Lines. The Assessing Officer was directed not to include service tax in total receipts for income calculation under section 44BB.
Issues involved: Appeal against assessment order u/s 144C(13) r.w.s. 143(3) for AY 2007-08 regarding inclusion of service tax in revenue for profit computation u/s 44B of IT Act, 1961.
Issue 1: Inclusion of service tax in revenue for profit computation u/s 44B The appellant contested the addition of service tax amounting to Rs. 3,40,76,521 in total revenue for profit calculation u/s 44B. Assessee argued that service tax should not be considered as revenue for this purpose. The appellant relied on various Tribunal decisions supporting their stance. The respondent, however, cited a contrary decision by Delhi ITAT. The Tribunal analyzed the arguments and previous rulings. Referring to the case of Islamic Republic of Iran Shipping Lines, it concluded that service tax, being a statutory liability without profit element, should not be included in total receipts for determining presumptive income under section 44BB. Consequently, the order of DRP was set aside, directing the Assessing Officer not to include service tax amount in total receipts for income calculation under section 44BB. The Tribunal upheld the appellant's appeal based on the aforementioned decision and the subsequent acknowledgment by Delhi ITAT regarding the nature of service tax as a statutory liability devoid of profit element.
Decision: The Tribunal allowed the appeal, pronouncing the judgment on 31st October, 2012.
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