Exclusion of Service Tax from Gross Receipts for Income Computation under Section 44BBA

The Tribunal held that service tax collected by the assessee should not be included in the gross receipts for computing deemed taxable income under section 44BBA of the Income-tax Act, 1961. The Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s decision to exclude the service tax component from the gross receipts. The final judgment confirmed that service tax collected by the assessee does not form part of the gross receipts for income computation under section 44BBA.

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Issues Involved:
1. Whether service tax amounting to Rs.89,12,89,825/- forms part of the gross receipts of the assessee for the purpose of computing its total income on a presumptive basis under section 44BBA of the Income-tax Act, 1961.

Issue-wise Detailed Analysis:

1. Inclusion of Service Tax in Gross Receipts under Section 44BBA:

The primary issue raised by the revenue pertains to whether the service tax collected by the assessee should be included in the gross receipts for computing total income on a presumptive basis under section 44BBA of the Income-tax Act, 1961. The assessee, a non-resident company engaged in the airline business, filed its return of income on a presumptive basis under section 44BBA. During assessment, the Assessing Officer (AO) included the service tax collected by the assessee in the gross receipts, thereby increasing the total income.

Assessee's Argument:
The assessee argued that service tax collected from customers does not form part of its gross receipts since it is collected in a fiduciary capacity on behalf of the Central Government. The service tax is a statutory levy with no profit element embedded in it. The assessee cited various judicial precedents to support its claim, including:
- DIT Vs. Mitchell Drilling International Pvt. Ltd. (2016) 380 ITR 130 (Del.)
- Islamic Republic of Iran Shipping Lines Vs. DCIT (2011) 46 SOT 101 (Mum. Trib.)
- DIT Vs. M/s. Schlumberger Asia Service Ltd. (2009) 317 ITR 156 (Uttarakhand HC)

CIT(A)'s Decision:
The Commissioner of Income-tax (Appeals) [CIT(A)] accepted the assessee's contention, holding that service tax collected by the assessee in a fiduciary capacity for the Central Government does not form part of the gross receipts for the purpose of section 44BBA. The CIT(A) relied on the decision of the Delhi High Court in Mitchell Drilling International Pvt. Ltd., which held that service tax collected does not constitute income and should not be included in gross receipts for computing presumptive income under section 44BB, a provision similar to section 44BBA.

Revenue's Argument:
The revenue, represented by the CIT, DR, argued that section 44BBA opens with a non-obstante clause, overriding the general computation mechanism and denying deductions for expenses. The revenue contended that the term "amount" in section 44BBA is absolute and inclusive of all payments received by the assessee, including service tax. The revenue cited the Supreme Court decision in SEDCO Forex International Inc. Vs. CIT (2017) 87 taxmann.com 29 (SC), which dealt with the inclusion of certain receipts under section 44BB, to support its argument.

Tribunal's Analysis:
The Tribunal noted that section 44BBA deems 5% of the aggregate amounts paid or payable to the assessee for the carriage of passengers, livestock, mail, or goods as the profits of the business chargeable to tax. The Tribunal emphasized that service tax collected by the assessee does not have any element of income and is collected on behalf of the Central Government. The Tribunal agreed with the CIT(A) and the Delhi High Court's decision in Mitchell Drilling International Pvt. Ltd., which clarified that service tax is not an amount received for services rendered by the assessee but is collected for the government.

Conclusion:
The Tribunal concluded that service tax collected by the assessee should not be included in the gross receipts for computing deemed taxable income under section 44BBA. The Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s decision to exclude the service tax component from the gross receipts.

Final Judgment:
The appeal of the revenue was dismissed, and the order of the CIT(A) was upheld, confirming that service tax collected by the assessee does not form part of the gross receipts for the purpose of computing income under section 44BBA of the Income-tax Act, 1961.

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