Non-resident taxation under section 44BB excludes service tax from gross receipts and bars interest for advance-tax default.

In a non-resident's assessment under the India-Norway tax treaty and section 44BB, the treaty article governing transportation of personnel or materials to an oil drilling site was applied in preference to section 44BB on the facts described. Service tax collected by the assessee was held not to form part of gross receipts for computing presumptive income, because it is collected only for remittance to the Government and is not consideration for services. Interest for default in advance tax under section 234B was treated as not leviable where tax was required to be deducted at source and the assessee had no advance tax liability.

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Issues: (i) Whether the assessee's income was taxable under Article 23(4) of the India-Norway Double Taxation Avoidance Agreement instead of being brought to tax under section 44BB of the Income-tax Act, 1961. (ii) Whether service tax formed part of gross receipts for computing presumptive income under section 44BB of the Income-tax Act, 1961. (iii) Whether interest under section 234B of the Income-tax Act, 1961 was leviable on the non-resident assessee.

Issue (i): Whether the assessee's income was taxable under Article 23(4) of the India-Norway Double Taxation Avoidance Agreement instead of being brought to tax under section 44BB of the Income-tax Act, 1961.

Analysis: The dispute was held to be identical to the assessee's earlier year. The contract was examined as a whole and the treaty provision concerning transportation of personnel or materials to an oil drilling site was applied in the assessee's favour. The Revenue's attempt to rely on a narrow contractual clause was rejected.

Conclusion: The issue was decided in favour of the assessee.

Issue (ii): Whether service tax formed part of gross receipts for computing presumptive income under section 44BB of the Income-tax Act, 1961.

Analysis: The Court applied the Delhi High Court's view that service tax collected by the assessee is not an amount paid or payable for services rendered and is only collected for remittance to the Government. It was therefore not includible in the gross receipts for section 44BB computation.

Conclusion: The issue was decided in favour of the assessee and against the Revenue.

Issue (iii): Whether interest under section 234B of the Income-tax Act, 1961 was leviable on the non-resident assessee.

Analysis: The Court followed the binding view that where tax was required to be deducted at source and the assessee was not liable to pay advance tax, interest under section 234B could not be levied. The cited High Court authority on the subject was treated as controlling.

Conclusion: The issue was decided in favour of the assessee.

Final Conclusion: The Revenue's challenge failed on all substantive grounds, and the assessment relief granted by the first appellate authority was upheld in full.

Ratio Decidendi: For a non-resident assessed under section 44BB, service tax collected for onward payment to the Government is not part of gross receipts, and interest under section 234B is not leviable where the assessee was not liable to advance tax and tax deduction at source was the primary mode of collection.

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