2025 (1) TMI 1531 - AT - Income Tax

GST collected and shown separately is statutory levy and excluded from receipts for presumptive income under s.44BB

ITAT MUMBAI - AT held that GST collected and shown separately on invoices is a statutory levy and must not be included in receipts for computing ... Computation of presumptive income u/s 44BB - GST collected by the assessee should not form part of 'amount' specified in section 44BB - contention of the Revenue is that the GST should be considered as part of the amount paid or payable and should be included in the total receipts as per section 44B(2) - assessee is contending that GST is a statutory levy and cannot be considered as the income - HELD THAT:- Issues as identical to Orient Overseas Container Line Ltd. [2024 (11) TMI 954 - ITAT MUMBAI] in our considered view the ratio laid down by the Co-ordinate Bench, the above case is applicable in assessee's case in the context of section 44BB of the Act also. Accordingly, we hold that the AO is not correct in treating the GST element which is collected as a separate item in the invoice as a statutory levy which is collected and deposited into the Government A/c, as income for the purpose of section 44BB of the Act. Therefore, the AO is directed to delete the addition made in this regard. The grounds raised by the assessee in this regard are allowed. Appeal of the assessee is allowed. 1. ISSUES PRESENTED and CONSIDEREDThe core legal issues considered in this judgment are:(i) Whether the Goods and Services Tax (GST) collected by the assessee should be included in the 'amount' specified under section 44BB of the Income Tax Act, 1961, for computing deemed profit.(ii) The initiation of penalty proceedings under section 270A of the Act.2. ISSUE-WISE DETAILED ANALYSIS(i) Inclusion of GST under section 44BBRelevant legal framework and precedents: Section 44BB of the Income Tax Act provides a special provision for computing profits and gains in connection with the business of exploration of mineral oils, where a sum equal to ten percent of the aggregate amounts specified is deemed to be the profits and gains of such business. The issue revolves around whether GST should be included in these amounts. The assessee relied on precedents such as the Uttarakhand High Court decision in DIT Vs. M/s Schlumberger Asia Services Ltd., which held that statutory levies like service tax do not form part of the gross receipts for computing presumptive income.Court's interpretation and reasoning: The Tribunal examined whether GST, a statutory levy, should be considered part of the gross receipts under section 44BB. It noted that GST is collected separately as part of invoices and is a statutory levy devoid of any profit element. The Tribunal referenced the decision of the Co-ordinate Bench in Orient Overseas Container Line Ltd., which established that GST should not be included in the gross receipts for presumptive taxation under section 44B, a provision similar to section 44BB.Key evidence and findings: The Tribunal observed that GST is shown as a separate line item in invoices and is collected and deposited into the government account without any profit accruing to the assessee. The Tribunal also noted that including GST in the computation would result in taxing an indirect tax, which is not the intention of the legislation.Application of law to facts: The Tribunal applied the legal principles established in similar cases and determined that GST, being a statutory levy, should not be included in the computation of deemed income under section 44BB. It emphasized that the intention is to tax the actual income from services rendered, not statutory levies collected on behalf of the government.Treatment of competing arguments: The Tribunal distinguished the case laws relied upon by the lower authorities, such as the decision in Sedco Forex International Inc., and found them inapplicable to the present case. The Tribunal upheld the reasoning that GST, like service tax, does not form part of the income for presumptive taxation.Conclusions: The Tribunal concluded that the Assessing Officer was incorrect in treating the GST component as part of the income for section 44BB purposes. It directed the deletion of the addition made by the AO in this regard.(ii) Initiation of penalty proceedings under section 270AThe Tribunal noted that the grounds related to the initiation of penalty proceedings under section 270A are consequential and do not warrant separate adjudication, given the resolution of the primary issue regarding GST.3. SIGNIFICANT HOLDINGSThe Tribunal held that GST collected by the assessee should not be included in the gross receipts for computing presumptive income under section 44BB of the Income Tax Act. The Tribunal emphasized that GST is a statutory levy collected on behalf of the government and does not contain any profit element. The Tribunal's decision aligns with the judicial precedents that statutory levies like service tax and GST should not be part of the deemed income computation under sections 44B and 44BB.Core principles established: The Tribunal reiterated the principle that statutory levies collected as part of invoices, such as GST, should not be included in the computation of income for presumptive taxation under sections 44B and 44BB. This principle is based on the understanding that such levies are collected on behalf of the government and do not contribute to the profit of the assessee.Final determinations on each issue: The Tribunal allowed the appeal of the assessee, directing the deletion of the GST inclusion in the computation of deemed income under section 44BB. The grounds related to penalty proceedings were deemed consequential and not separately adjudicated.