Service tax collected from clients excluded from gross receipts under Section 44BB for presumptive income calculation

The HC held that service tax collected by the assessee from clients is not includible in gross receipts for computing presumptive income under Section 44BB. The service tax is merely collected on behalf of the government and does not constitute income from services rendered. The Court relied on prior HC decisions and CBDT circulars clarifying that service tax should be excluded from taxable income and TDS calculations under relevant sections. The decision was in favor of the assessee.

---

---

Issues:
1. Inclusion of service tax collected by the Assessee in gross receipts for computing taxable income under Section 44BB of the Income Tax Act, 1961.

Analysis:
1. The case involved a company engaged in providing equipment on hiring and manpower for oil and gas exploration. The Assessee excluded service tax collected from customers while computing income for Assessment Year 2008-09 under Section 44BB (3) of the Act.
2. The Assessing Officer included the service tax amount in the gross receipts, but the Commissioner of Income Tax (Appeal) allowed the Assessee's appeal. The ITAT upheld the CIT (A) order, leading to the Revenue's appeal.
3. The key question was whether the service tax collected should be part of gross receipts under Section 44BB. The Revenue argued based on Supreme Court decisions, while the Assessee cited circulars and court rulings to support excluding service tax.
4. Section 44BB provides for presumptive income taxation for non-resident businesses in oil exploration. The Court noted that only amounts paid for services provided by the Assessee should be part of gross receipts under this section.
5. Referring to precedents like Chowringhee Sales Bureau and George Oakes (P) Ltd., the Court emphasized that service tax collected but not forming part of the Assessee's income should not be included in gross receipts for presumptive income calculation under Section 44BB.
6. The Court highlighted CBDT circulars stating that service tax is not considered income and should not be included in taxable amounts. It concluded that service tax collected is not part of income and should not be included in gross receipts for computing presumptive income under Section 44BB.
7. The judgment aligned with the decision of the High Court of Uttarakhand in a similar case, emphasizing that reimbursements like customs duty do not constitute gross receipts under Section 44BB.
8. Ultimately, the Court ruled in favor of the Assessee, holding that service tax collected should not be included in gross receipts for computing presumptive income under Section 44BB, based on legal interpretations, precedents, and CBDT circulars.

---