GST excluded from presumptive income calculation under Section 44B for non-resident shipping businesses

The ITAT Mumbai held that GST cannot be included when computing presumptive income under Section 44B for non-resident shipping businesses. The tribunal ruled that Section 145A, which includes taxes in income computation, does not apply to Section 44B's presumptive taxation mechanism. GST was deemed a statutory levy collected by service providers as government agents, not revenue from shipping services. Including GST would constitute "tax on tax" creating cascading effects contrary to legislative intent. The tribunal distinguished GST from actual shipping charges, emphasizing Section 44B applies only to specified amounts for carriage of goods. The assessee's position was upheld, with Section 115JB provisions ruled inapplicable due to deemed taxation under Section 44B.

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Issues Involved:

1. Inclusion of GST in the computation of presumptive income under Section 44B of the Income Tax Act.
2. Application of Section 145A and its impact on the computation of income.
3. Applicability of Section 115JB concerning book profits.
4. Short grant of tax deducted at source and credit of advance tax.
5. Erroneous levy of interest and fee.

Issue-wise Analysis:

1. Inclusion of GST in Section 44B Computation:
The primary issue was whether GST should be included in the gross receipts for computing presumptive income under Section 44B. The assessee argued that GST, like service tax, does not form part of the income as it is collected on behalf of the government. The Tribunal agreed, citing past judgments and the principle that taxes collected do not have an income element and should not be included in gross receipts. The Tribunal upheld the minority view of the DRP that GST should not be included, aligning with past decisions that service tax is not part of gross receipts under Section 44B.

2. Application of Section 145A:
The Tribunal examined the amendment to Section 145A, which includes services for valuation purposes. However, it concluded that Section 145A pertains to the valuation of inventory and does not alter the presumptive computation under Section 44B. The Tribunal emphasized that Section 44B, with its non-obstante clause, overrides other provisions, including Section 145A, and thus GST should not be included in the deemed income computation.

3. Applicability of Section 115JB:
The Tribunal addressed the computation of book profits under Section 115JB, noting that the assessee's income from the operation of ships is taxed under Section 44B and Article 8 of the India-Hong Kong Tax Treaty. Consequently, the provisions of Section 115JB were deemed inapplicable, and the book profit computation by the AO was deleted.

4. Short Grant of Tax Deducted at Source and Credit of Advance Tax:
The assessee raised concerns about the short grant of TDS and advance tax credit. The Tribunal acknowledged that a rectification application was pending with the AO and directed the AO to examine and resolve the issue.

5. Erroneous Levy of Interest and Fee:
The Tribunal noted that the issue regarding the erroneous levy of interest and fee was consequential to the main issues and would be addressed accordingly.

Conclusion:
The appeal was allowed, with the Tribunal ruling in favor of the assessee on the primary issue of GST inclusion under Section 44B, affirming that GST should not be included in gross receipts for presumptive income computation. The Tribunal also resolved related issues concerning Section 115JB and directed the AO to address pending rectification applications regarding TDS and advance tax credits.

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