TaxTMI 
TaxTMI 
2025 (1) TMI 1531
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....tained certificate of establishment of place of business in India from Ministry of Corporate Affairs. The assessee is engaged in rendering offshore drilling services to Oil and Gas Exploration and production companies globally. The assessee was engaged by Reliance Industries Ltd. for rendering drilling, side tracking, testing, completing and plugging oil well and exploration services. The assessee filed the return of income for AY 2021-22 on 14.03.2022 declaring total income at Rs. 27,52,60,013/-. Since the assessee has undertaken work in connection with extraction of / production of mineral oils it is claimed by the assessee that it qualifies for taxation as per section 44BB of the Act at a deemed profit of 10% of gross revenues. The assessee's case was selected for scrutiny under CASS and the statutory notices were duly served on the assessee. During the course of assessment, the Assessing Officer called on the assessee to furnish the details of all receipts including reimbursement received under its contracts. The AO further called on the assessee to give reasons if any sum has been excluded from its total receipts used for computing deemed profit under section 44BB of the A....
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.... deposited to the Government A/c and thus devoid of any profit element. The ld. AR further submitted that the GST element is separately shown in the invoices raised by the assessee (page 79 of the appeal set) which substantiates the fact that GST is a separate levy collected by the assessee. The ld. AR also submitted that since the GST is collected and deposited into the Government A/c there is no element of profit included in the levy and therefore it cannot be included as the income for the purpose of section 44BB of the Act. It is also argued by the ld. AR that GST is a statutory levy and therefore, is not an income paid or payable / received or deemed to be received for provision of services or facilities for extraction or production of mineral oil in India by the assessee for the purpose of section 44BB of the Act. The ld. AR placed reliance on the decision of the Co-ordinate Bench in the case of Orient Overseas Container Line Ltd. (ITA No. 3278/Mum/2023 dated 24.10.2024) wherein the Co-ordinate Bench has held that GST cannot be considered as part of receipt for the presumptive tax under section 44B of the Act. The ld. AR argued that the ratio laid down by the Co-ordinate Benc....
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....nder Section 44BB. Disputed by AO and upheld by DRP. Invoice raised on customer Service charge is indicated separately and GST is levied on such service charge is also indicated separately. Service charge is indicated separately and GST is levied on such service charge is also indicated separately (please refer Pages 79-80 of Factual Paperbook -DRP directions). Judicial precedents relied upon by the taxpayer Various Supreme Court and High Court rulings inter-alia including Vantage International, Transocean Offshore, Schlumberger Asia and Boskalis International Dredging, etc. CBDT circulars on tax deduction at source. Various Supreme Court and High Court rulings inter-alia including Vantage International, Transocean Offshore, Schlumberger Asia and Boskalis International Dredging, etc. CBDT circulars on tax deduction at source. Arguments/Judicial Precedents relied upon by the tax authorities Supreme Court decision in the case of Sedco Forex International Inc. Amendment to Section 145A of the Act read with Income Computation and Disclosure Standards provisions. Supreme Court decision in the case of Sedco Forex International Inc. Amendment t....
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....oils outside India. (3) Notwithstanding anything contained in sub-section (1), an assessee may claim lower profits and gains than the profits and gains specified in that sub-section, if he keeps and maintains such books of account and other documents as required under sub-section (2) of section 44AA and gets his accounts audited and furnishes a report of such audit as required under section 44AB, and thereupon the Assessing Officer shall proceed to make an assessment of the total income or loss of the assessee under sub-section (3) of section 143 and determine the sum payable by, or refundable to, the assessee. [(4) Notwithstanding anything contained in sub-section (2) of section 32 and subsection (1) of section 72, where an assessee declares profits and gains of business for any previous year in accordance with the provisions of sub-section (1), no set off of unabsorbed depreciation and brought forward loss shall be allowed to the assessee for such previous year.] Explanation.-For the purposes of this section,- (i) "plant" includes ships, aircraft, vehicles, drilling units, scientific apparatus and equipment, used for the purposes of the said bu....
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....entures Lad. [2023] 157 tasumann.com 203 (SC) iv. Schlumberger Asia Services Ltd. [2024] 158 taxfmann.com 267 (SC) Further, Hon'ble Bombay High Court in the case of Pr. CIT(IT) v. Boskalis International Dredging International CV (Income Tax Appeal No. 55 OF 2017 dated 25 March 2019) (followed the decision of Delhi High Court and Mitchell Drilling International Pty Ltd. (ITA No. 403/2013 and 384/2015) dated 28/09/2015 and held as under: "3. Learned Counsel for the Assessee drew our attention to a decision of the Delhi High Court in the case of Director of Income-tax-1 Vs. Mitchell Drilling International (P.) Lid 3 in which identical issue had come up for consideration. The High Court referred to the decision of this Court in the case of Sudarshan Chemicals Industries Limited (supra) which was approved by the Supreme Court in case of CIT Vs. Lakshmi Machine Works and also on the decision in the case of Schlumberger Asia Services Ltd. (supra) and held as under: "In Lakshmi Machine Works (supra), the Supreme Court approved the decision of the Bombay High Court in Sudarshan Chemicals Industries Ltd (xupra) which in turn considered the decision of the ....
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....unt of" is defined to mean as 'because of, by reason of. D. Ramanatha Aiyer: The Law Lexicon defines "on account of to mean "because of, by reason of, towards payment of (1) concerning (2) because of". It is only if the service tax reimbursed to them by the ONGC, which was paid by the assessee to the Government earlier, is held to be a payment in consideration of the services and facilities provided by the assessee, in connection with the prospecting. extraction and production of mineral oils in India, would it then fall within the ambit of sub-section (2) of Section 44BB. 28. As the expression 'amount paid or payable' in Section 44BB(2)(a), and the expression amount received or deemed to be received in Section 44BB(2)(b), is qualified by the words 'on account of the provision of services and facilities in connection with, or supply of plant and machinery, it is only such amounts, paid or payable for the services provided by the assessee, which can form part of the gross receipts for the purposes of computation of gross income under Section 44BB(1) read with Section 44BB(2). DIT v. Mitchell Drilling International (P.) Ltd. [2015] 62 taxmann.com 24/234 Taxma....
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....o specified and the remaining part of the service tax shall be paid by the service provider. A manufacturer or producer of final products or a provider of output service shall be allowed to take credit of Service tax paid on any input service CGST Act, 2017 (1) Every deposit made towards tax, interest, penalty, fee or any other amount by a person by internet banking or by using credit or debit cards or NEFT or RTGS or by such other mode and subject to such conditions and restrictions as may be prescribed, shall be credited to the electronic cash ledger of such person to be maintained in such manner as may be prescribed. (2) The input tax credit as self- assessed in the return of a registered person shall be credited to his electronic credit ledger, in accordance with section 41, to be maintained in such manner as may be prescribed. (3) The amount available in the electronic cash ledger may be used for making any payment towards tax, interest, penalty, fees or any other amount payable under the provisions of this Act or the rules made thereunder in such manner and subject to such conditions and within such time as may be prescribed. (4) The amount available in the ....
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....rnment and why a penalty equivalent to the amount specified in the notice should not be imposed on him under the provisions of this Act Section 73A(3)- Finance Act, 1994 Where any amount is required to be paid to the credit of the Central Government under subsection (1) or sub-section (2), and the same has not been so paid, the Central Excise Officer shall serve on the person liable to pay such amount, a notice requiring him to show cause why the said amount, as specified in the notice, should not be paid by him to the credit of the Central Government c. Levy is an indirect tax which can be collected from the buyer / service recipient Service Tax and GST both are an indirect tax and can be passed on by service provider to the service recipient. Relevant extract of the provisions is reproduced hereunder:" Service Tax Reference under the law, rules, etc. Provisions Reference under the law, rules, etc. Provisions Section 83 - Finance Act, 1994 Section 83 makes certain provisions of the Central Excise Act applicable, and thereunder the provisions of, among others, sections 12A and 12B of the Central Excise Act shall apply, so far ....
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....n the judicial precedents delivered in respect of erstwhile tax law would apply mutatis mutandis to the GST laws also. 21. Otherwise also it would be quirk of a fate that tax collected on behalf of the customer is again to be held as part of taxable income of the assessee who is collecting GST. The assessee is taxable person under the GST laws and shows GST separately in the invoice raised on the customers. We have perused the copy of the sample invoice produced before us at our direction wherein, it is seen that service charge is indicated separately and CGST is levied on such service charge is also indicated separately. If the GST services have been indicated in the invoice separately then it cannot be included for purpose of taxation while computing the income. For instance there are various TDS provisions and CBDT has clarified through various circulars that if GST services are indicated separately in the invoice then no tax would be deducted at GST components. By way of illustration following circulars have been referred to before us under various Sections:- Sr.No. Circular No. Relevant Section Circular No. 5 of 2023 Section 194BA ....
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....ent of income. 26. The core argument of the department before us and by the ld. DRP is that amendment in the provisions of Section 145A of the Act brought by Finance Act 2018, since it includes "services" within its code therefore, income has to be computed in accordance with Section 145A and any taxes levied under services is included and for that heavy reliance has been placed on the judgment of Hon'ble High Court of Bombay in the case of Knight Frank (India) Pvt. Ltd (Bombay High Court) [2016] 72 taxmann.com 300 (Bombay). However the Hon'ble Court held that Section 145A restricts its ambit only to valuation of purchase and sale of goods in inventory and would not apply to service tax billed on rendering of service as service tax billed has no relation to any goods nor does it have anything to do with bringing goods to a particular location. Section 145A which is for the method of accounting which starts with 'for the purpose of determining the income chargeable under the head 'Profits and gains of business or profession', being a general provision, would not apply to the special provisions of section 44B of the Act. Further, the words "For the purpose of determi....
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....tion Contract or Revenue recognition shall apply for determining he receipts or turnover, as the case may be." 29. Thus, reliance placed by the DRP on the aforesaid Circular is not valid since Delhi High Court in the case of Chamber of Tax Consultants v. Union of India [2017] 87 taxmann.com 92 (Delhi) held that the aforesaid Circular was ultra vires the provisions of the Act and liable to be struck down. Also, the amendment was introduced vide Finance Act 2018 to bring certainty on the issue of applicability of ICDS and not to validate the circular. Even otherwise, in the aforesaid Circular, CBDT has also clarified that where there is a conflict between ICDS which is a general provision and specific provisions, specific provision shall prevail. 30. Before us, the plea was taken that if GST is to be added to the amounts paid on account of taxes, then deduction of such GST is also required to be given u/s.43B. Though the provision of Section 44B overrides Section 28-43A of the Act, but other sections including Section 43B are not specifically over ridden by Section 44B. This issue has been decided by the Hon'ble Uttarakhand High Court in the case of DIT v. Schlumber....
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.... section 44BB are similarly worded and that the ratio laid down by the coordinate bench in the above case will apply to assessee's case also since the issue contended is identical. We notice that the Co-ordinate Bench in the above decision has held that GST should not part of gross receipts for computing presumptive income under section 44B of the Act the reasons as listed below - (i) GST is a statutory levy collected separately as part of invoice and therefore cannot be included for purpose of taxation while computing the presumptive income. In assessee's case from the perusal of records, we notice that the GST is a separate line item in the invoice. (ii) If GST is included in the income for applying the presumptive tax of 10% then the same would amount to tax on tax i.e. Income tax on an indirect tax levy (iii) The intention is to tax the receipt / charges / consideration arising out of the services rendered on presumptive basis and that GST being a mandatory 'statutory levy" cannot be said to be in the nature of charges / receipt / consideration (iv) Section 44B overrides the provisions of Section 29 of the Act, and therefore Secti....