Non-resident airline operator's service tax collections excluded from gross receipts under section 44BBA for presumptive income computation

ITAT Kolkata ruled in favor of the assessee regarding computation of presumptive income under section 44BBA. The tribunal held that service tax collected by a non-resident airline operator should not be included in gross receipts for computing deemed taxable income. Following the precedent in Mitchell Drilling International case, the tribunal determined that service tax is merely collected by the assessee for remittance to the government and does not constitute income received for services rendered.

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Issues Involved:
1. Whether service tax forms part of the gross receipts for computing total income on a presumptive basis under Section 44BBA of the Income-tax Act, 1961.

Summary of Judgment:

Issue: Inclusion of Service Tax in Gross Receipts under Section 44BBA
The primary issue in these appeals is whether service tax should be included in the gross receipts of the assessee for the purpose of computing total income on a presumptive basis under Section 44BBA of the Income-tax Act, 1961.

Facts of the Case:
The assessee, a non-resident company engaged in airline services, filed its returns on a presumptive basis under Section 44BBA. The Assessing Officer (AO) included the service tax component in the gross receipts, leading to an assessed income higher than reported by the assessee.

Assessee's Argument:
The assessee contended that service tax collected does not form part of the gross receipts for computing deemed taxable income as it is collected in a fiduciary capacity for the Central Government. The assessee relied on several judicial precedents, including:
- DIT Vs. Mitchell Drilling International Pvt. Ltd.
- Islamic Republic of Iran Shipping Lines Vs. DCIT
- Sundowner Offshore International (Bermuda) Ltd. Vs. ADIT
- Orient Overseas Container Line Ltd. Vs. ADIT

CIT(A)'s Decision:
The CIT(A) upheld the AO's decision, stating that service tax forms part of the turnover under Section 44BBA(1). The CIT(A) noted that the Settlement Commission had ruled in favor of the assessee for earlier years, but the Revenue had not accepted this interpretation and had filed a writ petition.

Tribunal's Findings:
The Tribunal referred to its own decision in the assessee's case for AY 2015-16, which was based on the decision of the Hon'ble High Court of Uttarakhand in DIT Vs. Schlumberger Asia Services Ltd. and CIT Vs. B. J. Services Co. ME Ltd. The Tribunal noted that:
- Service tax collected does not have any element of income and is collected on behalf of the Central Government.
- Only amounts paid or payable for services provided by the assessee can form part of the gross receipts under Section 44BBA.
- The provisions of Section 44BB, as interpreted by the courts, are pari materia to Section 44BBA.

Conclusion:
The Tribunal concluded that service tax should not be included in the gross receipts for computing deemed taxable income under Section 44BBA. The appeals of the assessee were allowed, and the Tribunal's decision from AY 2015-16 was applied mutatis mutandis to the present appeals.

Result:
All appeals by the assessee were allowed, and the inclusion of service tax in gross receipts for the purpose of Section 44BBA was rejected.

Pronouncement:
The order was pronounced in the open court on 9th January, 2024.

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