2019 (1) TMI 457 - AT - Income Tax

Tribunal upholds decision to exclude service tax from income under section 44B

The Tribunal upheld the Dispute Resolution Panel's directions, dismissing the revenue's appeal. It directed the Assessing Officer to delete the addition ... Determination of the income u/s 44B - DRP has directed the AO not to include the service Tax collected by the assessee in the gross receipts for the purpose of computing presumptive income u/s 44B - Held that:- We notice that the directions of the DRP are based on the findings in the case of DDIT vs. Mitchell Drilling International Pvt. Ltd. ( [2015 (10) TMI 259 - DELHI HIGH COURT]). Moreover, the issue involved in the present case is covered in favour of the assessee by the order of the coordinate Bench rendered in the assessee’s own case for the A.Y. 2007-08 and 2008-09. Since, the directions of the Ld. DRP are based on the principles of law laid down by the Hon’ble Delhi High Court and further covered by the decision of the coordinate Bench in assessee’s own cases for the assessment years 2007-08 and 2008-09, we do not find any reason to deviate from the view taken by the Ld. DRP. Hence, we uphold the DRP directions issued u/s 144C (5) of the Act holding that the same does not suffer from any factual or legal infirmity to interfere with. Issues:- Dispute regarding inclusion of service tax in gross receipts for computing presumptive income u/s 44B of the Income Tax Act, 1961.Analysis:1. Background: The appeal was filed by the revenue against the Dispute Resolution Panel directions pertaining to the assessment year 2012-13, challenging the direction not to include service tax collected by the assessee in gross receipts for computing presumptive income u/s 44B.2. Facts and AO's Actions: The foreign company filed its return, which was selected for scrutiny. The AO proposed inclusion of service tax in the income under section 44B, levied interest, and initiated penalty proceedings.3. Grounds of Appeal: The revenue questioned the DRP's direction, arguing that service tax should be included in gross receipts for taxation under section 44B read with section 172 of the Act.4. Hearing and Non-Appearance: The case was scheduled for hearing, but no one appeared on behalf of the assessee, leading to the case being disposed of based on the material on record and the arguments presented by the departmental representative.5. Revenue's Argument: The departmental representative contended that service tax should be included in gross receipts for taxation purposes, contrary to the DRP's direction.6. Decision and Rationale: The Tribunal reviewed the submissions, orders, and relevant cases. It noted that the issue was covered in favor of the assessee by a previous ITAT order and a Delhi High Court decision. The Tribunal agreed with the DRP's reasoning based on legal precedents and directed the AO to delete the addition of service tax from the income.7. Final Decision: Upholding the DRP's directions and citing legal precedents, the Tribunal dismissed the revenue's appeal, directing the AO to remove the service tax addition after verifying the payments made by the assessee.This detailed analysis of the judgment highlights the key legal arguments, the reasoning behind the decision, and the application of relevant legal principles, ensuring a comprehensive understanding of the case.