2020 (1) TMI 1737 - AT - Income Tax

Service Tax Excluded from Gross Receipts Under Section 44B for Presumptive Income Calculation

ITAT Mumbai held that service tax collected by the assessee is not includible in gross receipts for computing presumptive income under section 44B, ... Inclusion of service tax for the purpose of computing presumptive income u/s 44B - HELD THAT:- The Co-ordinate bench of ITAT, in assessee’ own case for AY 2007-08 to 2013-14 [2013 (10) TMI 742 - ITAT MUMBAI], [2015 (7) TMI 1153 - ITAT MUMBAI], [2016 (10) TMI 885 - ITAT MUMBAI] [2018 (11) TMI 1980 - ITAT MUMBAI] had considered an identical issue and held that service tax collected by the assessee does not have any element of income, therefore, it cannot form part of gross receipts for the purpose of computation of presumptive income u/s 44B. An identical issue has been considered in the case of Boskalis International Dredging International CV. [2019 (3) TMI 2066 - BOMBAY HIGH COURT] wherein by following the decision of Mitchell Drilling International Pvt. Ltd [2015 (10) TMI 259 - DELHI HIGH COURT] held that service tax collected by the assessee on the amount received by it for rendering services is not to be included in the gross receipts in terms of section 44BB(2) r.w.s. 44BB(1) of the I.T.Act, 1961. Thus, we direct the Ld. AO to excluded service tax collected from gross receipts from operations for the purpose of computation of presumptive income under the provision of section 44B of the I. T.Act, 1961. Short grant of credit for prepaid taxes, including advance tax and self assessment tax - We find that the assessee has taken a ground challenging the findings of the Ld. AO in short granting credit for prepaid taxes - The issue of credit for TDS is based on material evidences placed by the assessee before the Ld. AO. Therefore, we set aside the issue to the file of the Ld. AO and direct him to reconsider the issue, in light of the evidences filed by the assessee and if, the Ld. AO found that the claim of the assessee is correct with reference to evidences filed before him, then the Ld. AO is directed to allow credit for prepaid taxes as claimed by the assessee. ISSUES: Whether service tax collected should be included in gross receipts for the purpose of computing presumptive income under Section 44B of the Income-tax Act, 1961.Whether there was a short grant of credit for prepaid taxes (advance tax and self-assessment tax) and if so, whether the full credit should be allowed.Whether initiation of penalty proceedings under section 271(1)(c) of the Income-tax Act, 1961 was justified. RULINGS / HOLDINGS: The service tax collected by the assessee does not have any element of income and therefore, it cannot form part of gross receipts for the purpose of computation of presumptive income under Section 44B of the Income-tax Act, 1961; the service tax collected is to be excluded from gross receipts.The issue of short grant of credit for prepaid taxes is remanded to the Assessing Officer for reconsideration in light of the evidences filed by the assessee; if the claim is found correct, full credit for prepaid taxes is to be allowed.The judgment does not address the penalty proceedings under section 271(1)(c) substantively and no ruling is given on this issue in the present order. RATIONALE: The legal framework applied includes Section 44B of the Income-tax Act, 1961, which governs presumptive taxation of shipping income, and relevant judicial precedents. The Tribunal relied on prior decisions of the ITAT Mumbai Bench for earlier assessment years in the assessee's own case, which held that service tax collected is not includible in gross receipts under Section 44B. The Tribunal also followed the decision of the Hon'ble Bombay High Court in PCIT(IT)-1, Mumbai vs Boskalis International Dredging International CV, which upheld the exclusion of service tax from gross receipts, consistent with the Delhi High Court's ruling in DIT-I vs. Mitchell Drilling International Pvt. Ltd.Regarding prepaid tax credit, the Tribunal directed reassessment by the AO based on evidentiary material, reflecting procedural fairness and adherence to principles of natural justice.No unique interpretation or doctrinal shift was noted; the Tribunal followed established case law and statutory provisions. There was no dissenting or concurring opinion expressed in the judgment.