Tribunal Affirms Currency Conversion Rule and Excludes Service Tax from Gross Receipts in Business Income Case.

The Tribunal upheld the CIT(A)'s decisions on both issues. It mandated adherence to Rule 115(1) for currency conversion in computing business income, directing the assessing officer to verify the applicable TT Buying Rate. Additionally, it confirmed the exclusion of service tax from gross receipts under section 44B, dismissing the appeal and favoring the assessee.

---

---

Issues:
1. Correct procedure for calculating receipts in the case of income from business and profession in case of currency conversion.
2. Exclusion of service tax from gross receipts for the purpose of computation of income u/s. 44B.

Issue 1: Correct procedure for calculating receipts in the case of income from business and profession in case of currency conversion:

The appeal pertains to an order passed by the CIT(A) in the matter of assessment under section 143(3)/144C of the Income Tax Act, 1961, for the assessment year 2014-15. The dispute arose when there was a variance in the revenues offered to tax and the revenues as per 26AS due to currency conversion differences. The Assessing Officer brought an amount into the hands of the assessee, which was contested in appeal. The CIT(A) upheld the claim of the assessee but remitted the issue to the assessing officer for limited verification. The key contention was whether to adopt the rate used by ONGC for conversion or the rate applied by the assessee under Rule 115. The Tribunal observed that Rule 115 specifies the manner of foreign currency conversion for profits and gains of business and profession, and the proviso relates to tax deduction at source. The Tribunal held that accurate computation of income is crucial, and the correct procedure for currency conversion based on Rule 115(1) should be followed. The assessing officer was directed to verify the applicable TT Buying Rate under Rule 115(1) to ensure correctness.

Issue 2: Exclusion of service tax from gross receipts for the purpose of computation of income u/s. 44B:

The second ground of appeal raised by the assessee related to the exclusion of service tax from gross receipts for computing income under section 44B. The Tribunal noted that a similar issue was decided in favor of the assessee by a coordinate bench for the assessment year 2015-16. The Tribunal referred to the CIT(A)'s order in the previous year and held that the exclusion of service tax from gross receipts was justified. The Tribunal considered various legal precedents and upheld the CIT(A)'s decision, emphasizing that service tax should not be included in gross receipts for the purpose of presumptive tax under section 44BB. The Tribunal dismissed the appeal, aligning with the earlier decision and finding no reason to interfere.

In conclusion, the Tribunal upheld the CIT(A)'s decisions on both issues, emphasizing the correct procedure for currency conversion under Rule 115(1) and the exclusion of service tax from gross receipts for computation of income u/s. 44B. The appeal was dismissed, affirming the rulings in favor of the assessee.

---