2022 (11) TMI 385 - HC - Income Tax

Service tax collected for mineral oil services is excluded from taxable income under Section 44 BB, rules court.

The HC upheld the decision of the Income Tax Appellate Tribunal, ruling that service tax collected by assessees providing services related to mineral oil ... Scope of of Sections 44BB(1) and 44BB(2) - whether the service tax collected by the assessees in the course of provision of services and facilities in connection with, or supply of plant and machinery on hire, in the prospecting for, or extraction or production of, mineral oils in India, was liable to be included in the amount paid or payable for the purpose of computation of the ‘presumptive taxable income’ of the assessee? - HELD THAT:- Full Bench judgment of this Court in DIT (International Taxation) & others vs. Schlumberger Asia Services Limited [2019 (4) TMI 1177 - UTTARAKHAND HIGH COURT] held that the amount reimbursed to the assessee (service provider) by the ONGC (service recipient), representing the service tax paid earlier by the assessee to the Government of India, would not form part of the aggregate amount referred to in Clauses (a) and (b) of sub-section (2) of Section 44 BB. Thus following the judgment of the Full Bench of this Court in DIT (International Taxation) & others vs. Schlumberger Asia Services Limited (Supra), we are of the view that no fresh question of law arises for consideration in these appeals. Issues:Interpretation of Sections 44 BB(1) and 44 BB(2) of the Income Tax Act regarding the inclusion of service tax in the presumptive taxable income of the assessee.Analysis:The High Court dealt with income tax references arising from orders passed by the Income Tax Appellate Tribunal regarding the interpretation of Sections 44 BB(1) and 44 BB(2) of the Income Tax Act. The specific issue was whether the service tax collected by the assessees during the provision of services and facilities related to the prospecting for, or extraction or production of, mineral oils in India should be included in the computation of the 'presumptive taxable income' of the assessee. The Tribunal ruled in favor of the assessee, citing a Full Bench judgment of the Court in a similar case. The Full Bench had held that the reimbursed service tax paid by the assessee to the Government of India should not be part of the aggregate amount under Section 44 BB of the Income Tax Act.The appellant-Department argued that the Full Bench's decision was in favor of the Revenue and was influenced by a judgment of the Delhi High Court. However, the High Court clarified that the Full Bench's interpretation of Section 44 BB was based on its own analysis and was not bound by the Delhi High Court's view, which only had persuasive value. The Court emphasized that the Full Bench's decision was final and did not require reconsideration or referral to a Larger Bench.The Full Bench's judgment highlighted that only amounts paid for services directly related to the prospecting, extraction, or production of mineral oils should be considered for computing gross income under Section 44BB. It explained that service tax, being a tax on services, should not be treated as part of the service itself. Therefore, the reimbursement of service tax should not be included in the amounts specified in Section 44BB(2) as it does not represent payment for services provided in the mentioned activities. The Court, following the Full Bench's decision, concluded that no new legal questions arose in the appeals before them and dismissed the appeals accordingly.