GST excluded from presumptive income under Section 44B(1); MAT provisions under Section 115JB not applicable for AY 2022-23

The ITAT Mumbai held that GST cannot be included in the computation of presumptive income under Section 44B(1) of the Act, deleting the addition made by the AO for AY 2022-23, following its earlier decision for AY 2020-21. Additionally, the Tribunal ruled that the provisions of Section 115JB (MAT) do not apply to the assessee under Explanation 4A to Section 115JB(1), consistent with its prior findings for AY 2020-21. Consequently, the additions and applicability of MAT provisions challenged by the assessee were disallowed.

---

---

ISSUES:

Whether the assessment proceeding is non-jurisdictional due to issuance of notice by a non-jurisdictional Assessing Officer.Whether the assessment order is time-barred under Section 153 of the Income Tax Act, 1961.Whether Goods & Services Tax (GST) amount can be included for computing presumptive income under Section 44B of the Income Tax Act.Whether the provisions of Section 115JB of the Income Tax Act apply to a foreign company whose total income comprises solely of profits and gains from business referred to in Section 44B.Whether there is short grant of credit of Tax Deducted at Source (TDS) and if so, the extent of such short grant.Whether there is short grant of credit of advance tax and if so, the extent of such short grant.Whether the levy of interest and fee under Sections 234A, 234B, 234C, 234D, and 234F of the Income Tax Act is justified.Whether initiation of penalty proceedings under Section 270A of the Income Tax Act is justified in the absence of underreporting of income.

RULINGS / HOLDINGS:

The ground of non-jurisdictional assessment is dismissed as rendered academic in view of the decision on merits regarding GST inclusion.The ground of time-barred assessment is dismissed as rendered academic in view of the decision on merits regarding GST inclusion.The GST amount cannot be included in the gross receipts for computing presumptive income under Section 44B of the Act; the Tribunal held that "GST collections did not form part of the amounts specified under Section 44B(2) of the Act" and inclusion would amount to "tax on tax" which is not the intent of the legislation.The provisions of Section 115JB of the Act are not applicable to the foreign company whose total income comprises solely of profits and gains from business referred to in Section 44B, in view of Explanation 4A to Section 115JB(1), which states that such provisions "shall not be applicable and shall be deemed never to have been applicable."The Assessing Officer is directed to verify and grant the credit of TDS of INR 23,62,013 as claimed by the Assessee, correcting the short grant.The Assessing Officer is directed to verify and grant the credit of advance tax of INR 3,47,553 as claimed by the Assessee, correcting the short grant.The issues relating to levy of interest and fee are consequential and the Assessing Officer is directed to adjudicate the rectification application and re-compute interest/fee as per law after giving effect to the present order; Ground No.7 is allowed for statistical purposes.Penalty proceedings under Section 270A are independent and thus the ground challenging initiation of penalty proceedings is disposed of as premature.

RATIONALE:

The Tribunal relied on the statutory framework of Section 44B of the Income Tax Act, which contains a non-obstante clause overriding Sections 28 to 43A, prescribing that 7.5% of specified amounts shall be deemed profits and gains of shipping business for non-residents.The specified amounts under Section 44B(2) include only amounts paid or payable or received on account of carriage of passengers, livestock, mail or goods, including demurrage and handling charges, but exclude statutory taxes like GST, which are collected as a fiduciary agent for the Government.The Tribunal distinguished the applicability of Section 145A (valuation of sale/purchase of goods and inventory) from Section 44B, holding that Section 145A does not apply to the special provisions of Section 44B, as Section 44B contains an overriding non-obstante clause.Judicial precedents from the Hon'ble Supreme Court and various High Courts were relied upon to support the exclusion of service tax and GST from gross receipts for the purpose of presumptive taxation under Section 44B, emphasizing that inclusion would cause a cascading tax effect ("tax on tax") which the legislation does not intend.The Tribunal noted that GST is an indirect tax recovered on behalf of the Government and separately indicated in invoices, and that the Assessee discharged its GST liability through payment and input tax credit, further supporting exclusion from gross receipts.The Tribunal followed its own prior decisions in the Assessee's case for earlier assessment years, where identical issues were decided in favor of the Assessee, thereby upholding the principle of consistency and judicial discipline.Regarding Section 115JB, Explanation 4A clarifies that the provisions of the section shall not apply to foreign companies whose income is solely from specified shipping business profits under Section 44B, leading to exclusion of Minimum Alternate Tax (MAT) provisions for such Assessee.The directions to grant credit of TDS and advance tax are based on verification of records and correct application of tax credit principles under the Act.The interest and fee issues are consequential, requiring re-computation after giving effect to the present order, reflecting standard procedural practice.Penalty proceedings under Section 270A are independent and not to be adjudicated in the assessment appeal, consistent with statutory separation of assessment and penalty processes.

---