Exclusions in Gross Receipts under Section 44BB: Reimbursements for materials and fuel excluded, service tax included.

The Tribunal dismissed the inclusion of reimbursements for materials and fuel in gross receipts under section 44BB, following the Halliburton Offshore Services Inc. case. However, reimbursements for service tax and interest on service tax were excluded from gross receipts in line with the Mitchell Drilling International Pvt. Ltd. decision. As a result, the appeal was partly allowed.

---

---

Issues Involved:
1. Inclusion of reimbursements of expenses incurred on supply of materials in gross receipts under section 44BB.
2. Inclusion of reimbursements of expenses incurred on provision of fuel in gross receipts under section 44BB.
3. Inclusion of reimbursements of service tax in gross receipts under section 44BB.
4. Inclusion of reimbursements of interest on service tax in gross receipts under section 44BB.

Detailed Analysis:

Issue 1: Inclusion of Reimbursements of Expenses Incurred on Supply of Materials
The appellant contested the inclusion of INR 118,655,056 received as reimbursements for expenses on supply of materials in the gross receipts for determining income under section 44BB of the Income Tax Act, 1961. The CIT(A) affirmed the action of the Assessing Officer (A.O). The Tribunal referred to the Jurisdictional High Court decision in CIT Vs. Halliburton Offshore Services Inc., which held that section 44BB is a complete code in itself, and all amounts paid or payable to the assessee, whether in or out of India, are mutually inclusive for determining deemed profits and gains at 10%. The Tribunal dismissed Ground No. 1 of the assessee's appeal, aligning with the High Court's interpretation.

Issue 2: Inclusion of Reimbursements of Expenses Incurred on Provision of Fuel
The appellant challenged the inclusion of INR 692,665,431 received as reimbursements for expenses on provision of fuel in the gross receipts under section 44BB. The CIT(A) upheld the A.O's decision. The Tribunal again referred to the Halliburton Offshore Services Inc. case, emphasizing that all amounts paid or payable are included in the gross receipts for determining deemed profits. Consequently, Ground No. 2 of the assessee's appeal was dismissed.

Issue 3: Inclusion of Reimbursements of Service Tax
The appellant argued against the inclusion of INR 486,455,033 received as reimbursements for service tax in the gross receipts under section 44BB. The Tribunal referred to the Delhi High Court decision in DIT Vs. Mitchell Drilling International Pvt. Ltd., which clarified that service tax collected and passed on to the government does not form part of the gross receipts for computing presumptive income under section 44BB. The High Court noted that service tax does not have any element of income and should not be included in the gross receipts. The Tribunal allowed Ground No. 3 of the assessee's appeal, following the High Court's ruling.

Issue 4: Inclusion of Reimbursements of Interest on Service Tax
The appellant contested the inclusion of INR 7,254,268 received as reimbursements for interest on service tax in the gross receipts under section 44BB. The Tribunal again referred to the Mitchell Drilling International Pvt. Ltd. case, which held that service tax and its related reimbursements do not form part of the gross receipts for computing presumptive income. The Tribunal allowed Ground No. 4 of the assessee's appeal, consistent with the High Court's interpretation.

Conclusion:
The Tribunal dismissed Grounds No. 1 and 2 of the assessee's appeal, affirming the inclusion of reimbursements for materials and fuel in the gross receipts under section 44BB, as per the Halliburton Offshore Services Inc. case. However, Grounds No. 3 and 4 were allowed, excluding reimbursements for service tax and interest on service tax from the gross receipts, in line with the Mitchell Drilling International Pvt. Ltd. decision. The appeal was thus partly allowed.

---