Service tax excluded from turnover for income tax computation under section 44BB

The ITAT Mumbai bench allowed the appeal of the assessee against the order of the CIT(A), Mumbai, for the assessment years 2011-2012. The Tribunal held that service tax should not be included in turnover for computation under section 44BB of the Income Tax Act, aligning with the decision of the Delhi High Court in the Mitchell Drilling International case. Therefore, the Tribunal concluded that there was no merit in including service tax in the total turnover while computing income under section 44BB(1) of the Income Tax Act.

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Issues:
1. Inclusion of service tax in gross receipts while computing income u/s.44BB(1) of the I.T.Act.

Analysis:
The appeal was filed by the assessee against the order of CIT(A), Mumbai, for the assessment years 2011-2012. The sole grievance of the assessee pertained to the addition of service tax collected on behalf of the Government when computing income under section 44BB(1) of the Income Tax Act. The assessee, a non-resident company engaged in providing services and facilities related to the exploitation and production of mineral oil in India, contested that service tax should not be included in gross receipts for profit calculation under section 44BB.

The contention put forth by the assessee's legal representative was that service tax should not be considered in gross receipts while computing profit under section 44BB of the Income Tax Act. The argument was supported by referencing the decision of the Hon'ble Delhi High Court in the case of Mitchell Drilling International (P) Ltd. The Delhi High Court ruled that service tax collected by the assessee should not be included in gross receipts for presumptive income calculation under section 44BB(2) read with section 44BB(1). This decision was dated 28-9-2015 and had already been considered in an earlier judgment of the Hon'ble Uttarakhand High Court in the case of DIT Vs. Schlumberger Asia Services Ltd.

Subsequently, the ITAT Mumbai bench, in the case of Oceaneering International GmbH, held that service tax should not be included in turnover for computation under section 44BB, aligning with the decision of the Hon'ble Delhi High Court in the Mitchell Drilling International case. Therefore, the Tribunal, in line with the Delhi High Court's ruling, concluded that there was no merit in including service tax in the total turnover while computing income under section 44BB(1) of the Income Tax Act. Consequently, the appeal of the assessee was allowed, and the order was pronounced in open court on 07/07/2016.

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