TaxTMI 
TaxTMI 
2013 (10) TMI 743
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....have appreciated that service tax is a statutory levy and the appellant only acts as agent on behalf of Government for collection and deposit of service tax into the treasury and therefore, the amount so collected should not form part of gross freight for computing the taxable income. 1 (c) The learned ADIT further erred in not appreciating that service tax is neither a collection 'on account of carriage of goods' nor in the nature of 'demurrage charges or handling charges or any other amount of similar nature' to fall within the purview of section 44B of the IT Act. 2. Without prejudice to above, the ADIT erred in not appreciating that since the Indian agent of the appellant has been remunerated with a commission at arm's length, no further attribution can be made in the hands of the appellant since its tax liability gets extinguished. 3. On the facts and circumstances of the case and in law, the learned DDIT has erred in levying interest of Rs. 10,30,721 under section 234B of the IT Act despite the fact that the assessee was not liable to pay any advance tax on the basis of the fact that the incom....
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....AR has contended that the service tax collected by the assessee on behalf of the Government cannot be treated as amount paid or payable to the assessee on account of carriage of passengers, livestock, mail or goods etc. He has further submitted that the service tax is paid on the consideration for services and therefore, the amount of service tax itself cannot be included in the consideration of services. For the purpose of section 44B only the gross amount paid or payable to the assessee on account of carriage of passengers, livestock, mail or goods as to be taken into consideration and nothing else. He has referred the decision of Hon'ble Supreme Court in case of Union of India v. Gosalia Shipping (P.) Ltd. [1978] 113 ITR 307 and submitted that the consideration for carriage of goods is the amount which the charters had agreed to make to the owners of the ship and therefore the amount of service tax which is collected by the assessee on behalf of the Government cannot be considered a part of consideration. He has also relied upon the decision of this Tribunal in case of Islamic Republic of Iran Shipping Lines v. Dy. CIT(International Taxation) [2011] 46 SOT 101 (URO) and submitte....
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....ld that the mobilization charges received by the assessee should be taxed as per the provisions of section 44BB. The Ld. DR has also relied upon the following decision CIT v. B. J. Services Co. Middle East 300 ITR 392/G&T Resources (Europe) Ltd. Vs DDIT 55 DTR 312. 6. The Ld. DR has further contended that in case of Sudarshan Chemicals Industries Ltd. (supra) the Hon'ble High Court has held that the sales tax and Excise Duty cannot be part of the turnover for the purpose of section 80HHC wherein the definition of turnover has been provided and therefore, the said decision cannot be applied for the purpose of determination of the income as u/s 44B. The aggregate amount has to be considered for determining of income and not the profit element in the receipts. Thus, the Ld. DR has submitted that in view of the various decisions of Hon'ble Supreme Court as well as High Court the Excise Duty, sales tax has been treated as trading receipts and service tax which is similar to sales tax would also the part of the trading receipt and therefore would be included in the aggregate amount paid or payable to the assessee for the purpose of computation of income as per the provisions of sectio....
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....ed at any port outside India. There are two components of the amounts one which is paid or payable to the assessee in respect of the carriage or shipped at port in India and another the amount received or deemed to receive in India in respect of carriage or shipped at any port outside India. It is pertinent to note that section 44B over rides the provisions of section 28 to 43A, however, the other provisions of the Act are applicable apart from the provision of section 44B for computation of income of non-resident engaged in the business of shipping. It is pertinent to note that the sales tax receipt by any assessee is treated as trading or business receipt though the sales tax is collected by the assessee on behalf of the Government as held by Hon'ble Supreme Court in the case of Chowringhee Sales Bureau (P.) Ltd. (supra) in para 9 as under: "9. The fact that the appellant credited the amount received as sales-tax under the head "sales-tax collection account" would not, in our opinion, make any material difference. It is the true nature and the quality of the receipt and not the head under which it is entered in the account books as would prove decisive....
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....80HHC. It is pertinent to note that section 80HHC of Income Tax Act itself has provided the definition of export turnover as well as total turnover and the Hon'ble High Court has held that the Excise Duty and sales tax cannot be taken into account into turnover as they do not have any element of profit. This view has been taken by the Hon'ble High Court by drawing analogy from the definition of turnover provided u/s 80HHC itself wherein as per the clause (b) of explanation of section 80HHC export turnover is define by excluding freight and insurance charges. Therefore, on the similar analogy the Hon'ble High Court has held that the Excise Duty and Sales Tax also have no element of profit similar to that of freight and insurance. However no such exclusion from the aggregate of amounts provided under sub-section 2 of section 44B has been permitted while computing the profits and gains of the shipping business in case of non-resident as per section 44B. We quote section 44B as under: "44B. Special provision for computing profits and gains of shipping business in the case of non-residents- (1) Notwithstanding anything to the contrary contained in sections 28....
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....aggregate amount as per sub-section 2 of section 44B. The legislature has made it clear by inserting the explanation that the demurrage charges or handling charges or any other similar amount would be part of the aggregate amount for the purpose of determining the presumptive profits @ 7.5% of such amount. It is pertinent to note that if the element of profit is the only criteria for inclusion or exclusion of any amount then the demurrage charges or handling charges should not have been included in the aggregate amount for the purpose of determining the presumptive income because the demurrage charges and handling charges also not having any element of profit. Since the service tax Act has been came into force subsequent to the insertion of the explanation therefore, there was no reason/occasion for including the service tax along with the demurrage charges and handling charges in the explanation however when any other amount of similar nature is required to be included then the service tax as far as on the aspect of having no element of profit is similar in nature to that of demurrage charges or handling charges. 11. Further the term turnover is not relevant for estimation of p....