AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2016 (6) TMI 130
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....alled 'the Act'). During the course of scrutiny assessment proceedings, the Assessing Officer came to know that an amount of Rs. 114,351,759/- received on account of service tax had not been added to the gross revenue chargeable to tax u/s 44BB of the Act. It was the assessee's contention that statutory charges cannot form part of the amount for the purpose of deemed profit u/s 44BB of the Act. As per the assessee, service tax was in the nature of reimbursement and hence not includible in gross receipts for the purpose of taxation. The assessee contended that it had acted only as a collection agency for the Government for collection of service tax and as such, the collections on account of service tax could not be considered as income generating receipts in the hands of the assessee. It was further contended before the Assessing Officer that any receipt unconnected with the business of exploration, exploitation of oil etc. could not form part of the taxable receipts u/s 44BB of the Act. However, the Assessing Officer was of the opinion that for the purpose of presumptive determination of the assessee's profit, the quantum of amount received from the customers against its service ta....
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....ent in the said case is directly applicable in the facts of the instant case. 2. Whether on the facts and in the circumstances of the case and in law, the L( CIT(A) has erred in holding that the assessee is not liable to pay interest u/s 234B of the Act and in observing that the issue is covered in favour of the assessee by decision in tl case of M/s Maersk [334 ITR 79, Uttarakhand]. 2.1 The Ld. CIT(A) has erred in not appreciating the facts that the case of Maersk was distinguishable on facts wherein the employer filed to deduct tax at source despite the specific mandatory provisions of the Act stipulating the employer being liable to deduct tax on the salary paid to the employee, thereby holding that an employee is not liable to pay advance tax on salary. The ITAT has erred in relying upon this decision as the case does not lay down a general proposition of law that interest u/s 234B is not chargeable in all cases particularly in cases where the Nonresident assessee/payee/deductee has played a role in inducing non-deduction or short-deduction on the part of the payer / deductor. 2.2 The Ld. CIT(A) has erred in failing to take note of the observations of the Hon'ble High ....
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....Once the receipts are offered to tax u / s 44BB (1) & (2), which provides for computation of profits on gross basis, there is no scope for computing or recomputing the profits by excluding any element of receipts from the total turnover as the same would amount to defeating the very purpose of providing for a scheme of simpler mode of computation of profits and obviating the need for accounting for individual receipts or payments. 6. The Ld. DR further submitted that the amount mentioned in sub-section (2) of section 44BB clearly shows that the amount paid to the assessee on account of provision of services and facilities in connection with the extraction or production of mineral oil, whether paid in or outside India, are to be included. It was submitted by the Ld. DR that the service tax receipt squarely falls within the principle enunciated in Chowringhee Sales Bureau (P.) Ltd. v. CIT [1973] 87 ITR 542 (SC) wherein it was laid down that sales tax charged forms part of the trading receipts and is as such liable to be assessed to income tax. The Ld. DR submitted that since then the courts have consistently held similarly for all kinds of taxes or government receipts (that were r....
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....ns and have also perused the records. It is seen that the issue of includibility of service tax in the gross receipts is squarely covered by the judgment of the Hon'ble Delhi High Court in the case of Mitchell Drilling International Pty Limited (supra) wherein the Hon'ble Delhi High Court has held that service tax being statutory levy should not form part of gross receipts as per provisions of section 44BB of the Act. The relevant observations of the Hon'ble High Court are as under:- "8. Section 44BB (1) and (2) of the Act read as under: "44BB. (1) Notwithstanding anything to the contrary contained in sections 28 to 41 and sections 43 and 43A, in the case of an assessee, being a non-resident, engaged in the business of providing services or facilities in connection with, or supplying plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils, a sum equal to ten per cent of the aggregate of the amounts specified in sub-section (2) shall be deemed to be the profits and gains of such business chargeable to tax under the head "Profits and gains of business or profession" : Provided that this sub-section sha....
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....ded the services can legitimately be considered to form part of the gross receipts for the purposes of computation of the Assessee's 'presumptive income' under Section 44BB of the Act. 12. In Chowringhee Sales Bureau (supra) sales tax in the sum of Rs. 32,986 was collected and kept by the Assessee in a separate 'sales tax collection account'. The question considered by the Supreme Court was: 'Whether on the facts and in the circumstances of the case the sum of Rs. 32,986 had been validly excluded from the assessee's business income for the relevant assessment year?". However, there the Assessee did not deposit the amount collected by it as sales tax in the State exchequer since it took the stand that the statutory provision creating that liability upon it was not valid. In the circumstances, the Supreme Court held that the sales tax collected, and not deposited with the treasury, would form part of the Assessee's trading receipt. 13. The decision in George Oakes (P) Ltd. (supra) was concerned with the constitutional validity of the Madras General Sales (Definition of Turnover and Validation of Assessments) Act, 1954 on the ground that the word turnover was defined to i....
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....ike the aforementioned tools like interest, rent etc. 'also do not have any element of 'turn over''. 15. In CIT v. Lakshmi Machine Works (supra), the Supreme Court approved the decision of the Bombay High Court in CIT v. Sudarshan Chemicals Industries Ltd. (supra) which in turn considered the decision of the Supreme Court in George Oakes (P) Ltd. (supra). In the considered view of the Court, the decision of the Supreme Court in Lakshmi Machines Works (supra) is sufficient to answer the question framed in the present appeal in favour of the Assessee. The service tax collected by the Assessee does not have any element of income and therefore cannot form part of the gross receipts for the purposes of computing the 'presumptive income' of the Assessee under Section 44 BB of the Act. 16. The Court concurs with the decision of the High Court of Uttarakhand in DIT v. Schlumberger Asia Services Ltd (supra) which held that the reimbursement received by the Assessee of the customs duty paid on equipment imported by it for rendering services would not form part of the gross receipts for the purposes of Section 44 BB of the Act. 17. The Court accordingly holds that for the purposes of....