Exclusion of service tax from gross receipts for tax computation upheld under Income Tax Act

The Tribunal upheld the CIT(A)'s decision that service tax should not be included in gross receipts for computing taxable income under section 44BB of the Income Tax Act, 1961. The Tribunal emphasized consistency and the absence of contrary higher court decisions, stating that service tax collected on behalf of the government does not constitute receipts for services or facilities provided. The revenue's appeal was dismissed, affirming the exclusion of service tax from total receipts for determining presumptive income.

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Issues Involved:
1. Whether service tax should be included in the total receipts for determining the presumptive income under section 44BB of the Income Tax Act, 1961.

Detailed Analysis:

Background:
The appeal was filed by the revenue against the order of the CIT(A)-XXIX, New Delhi, dated 10.12.2012, concerning the assessment year (AY) 2009-10. The core issue was whether service tax, being a statutory liability, should be included in the gross receipts for computing taxable income under section 44BB of the Income Tax Act, 1961.

Facts of the Case:
The assessee, an Australian company, engaged in providing equipment and manpower for mineral oil and natural gas exploration, earned gross receipts of Rs. 21,05,89,855 and offered a total income of Rs. 2,12,90,261 in its return under section 44BB. The Assessing Officer (AO) included an additional Rs. 2,57,20,779 collected as service tax in the gross receipts, resulting in a taxable income assessment of Rs. 2,38,62,338.

CIT(A) Decision:
The CIT(A) allowed the appeal of the assessee, ruling that service tax should not be included in the gross receipts for the purposes of section 44BB, following a similar decision for AY 2008-09.

Tribunal's Consideration:
The Tribunal reviewed the arguments and relevant material, including a previous decision in the assessee's own case for AY 2008-09, where the ITAT upheld the CIT(A)'s decision. The Tribunal also considered similar cases, such as Sedco Forex International Drilling Inc. vs. Addl. DIT and Technip Offshore Contracting BV, where it was concluded that service tax, being a statutory liability, does not involve any element of profit and should not be included in the total receipts for determining presumptive income under section 44BB.

Legal Precedents:
1. Schlumberger Asia Services Ltd. Case: The Hon'ble Uttarakhand High Court ruled that reimbursement of custom duty paid by the assessee could not form part of the amount for deemed profits under section 44BB.
2. Islamic Republic of Iran Shipping Lines Case: The Mumbai Bench held that service tax, being a statutory liability, should not be included in the total receipts for determining presumptive income.

Tribunal's Conclusion:
The Tribunal upheld the CIT(A)'s decision, emphasizing the rule of consistency and the absence of any contrary higher court decision. It was determined that service tax collected on behalf of the government does not constitute receipts for services or facilities provided under section 44BB.

Final Judgment:
The Tribunal dismissed the revenue's appeal, affirming that service tax should not be included in the gross receipts for computing taxable income under section 44BB. The order was pronounced in the open court on 09.01.2015.

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