TaxTMI 
TaxTMI 
2025 (3) TMI 1266
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....44C(13) of the Act is ab-initio void being barred by limitation and hence, ought to be struck down. 1.2. The Id. AO erred in not appreciating that timelines for passing final assessment order as per section 153 of the Act being 12 months from the end of relevant AY 2021-22 was 31 March 2023. Accordingly, the final order passed under section 143(3) r.w.s. 144C(13) of the Act on 23 October 2023 is time barred. 1.3 The Id. AO erred in ignoring the decision of jurisdictional Mumbai High Court in the case of Shelf Drilling Ron Tappmeyer Ltd vs ACIT International tax [2023] (153 taxmann.com 162). 2. Inclusion of Goods & Service tax (GST) in the computation of presumptive income under section 44BB of the Act 2.1. The Id. AO erred in holding that GST would form part of the gross receipts for the purposes of income computation under section 448B(1) of the Act. The learned DDIT erred in not excluding from the gross receipts, GST of Rs. 13,10,09,191 collected by the appellant from customers in a fiduciary capacity. 2.2. The Id. AO erred in disregarding the favorable ITAT order and directions received from DRP in the previous years in appellant's own case, which have been accepte....
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....at it has offered gross receipts aggregating to Rs. 92,44,25,985/- u/s. 44BB of the Act on the basis of amount received from its customers. Further submitted that it has collected GST on behalf of the government aggregating to Rs. 13,10,09,191/- which are in the nature of taxes, which are collected from the service recipient and remitted into the government treasury and the company merely acts as a link between the service recipient and the Central government and the collection so made on behalf of the government cannot be brought to tax in its hand under the presumptive provision u/s. 44 BB of the Act. Further reliance was placed on its own order passed by the Tribunal for A.Y. 2010-11 wherein it's was held that the service tax doesn't form part of the gross receipts for the purposes of presumptive taxation u/s. 44 BB of the Act. Further reliance was placed on the DRP directions for A.Y 2016-17 and 2020-21 wherein the service tax was not held includable in gross receipts. 5. The submissions so filed by the assessee were considered but not found acceptable to the AO. Referring to the decision of authority for advance ruling in case of Siem Offshore Inc. 337 ITR 0207 and Co....
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....it to reiterate that Sec. 44BB is a special code providing a "computational provision, which is inherently reliant on Sec. 145A, being the "Accounting provision. That is the reason why the Legislature, in its wisdom, did not extend the non obstante provision beyond Sections 28 to 41 and sections 43 and 43A of the Act. f. Having once held that of the judgment of Knight Frank (India) (P.) Ltd. [2016] 72 taxmann.com 300 (Bombay) would not apply to the instant case in view of amended clause 145A(a)(ii) of the Act, there is nothing that stops the Ld. AO from taking the sums received/deemed received in toto (Without any splitting up of GST or any other levy) in connection to the eligible services/facilities. g. In view of the drastic amendment in the Act, the scenario stands altered. Section 145A has been substituted by the Finance Act 2018 for A.Y. 2018-19 and onwards. h. The judgement of the Hon'ble SC in Sedco Forex International Inc. can be taken to cover the matter in favour of Revenue. With utmost reverence to the Hon'ble Courts, their Lordships of Hon'ble High Court of Delhi, Hon'ble High Court of Bombay and Hon'ble High Court of Uttarakhand did not have ....
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....rvices and facilities for extraction of production of mineral oil for the purpose of presumption of taxation u/s. 44BB of the Act. It was submitted that the matter is squarely covered by the decision of the Coordinate Bench in case of Orient Overseas Container Line Limited V. DCIT (International Taxation) in ITA no. 3278/MUM/2023 wherein the Coordinate Bench has held that GST cannot be considered as part of the receipt for presumptive taxation u/s. 44B of the Act. It was further submitted that the said order of the Coordinate Bench has thereafter been followed by the Coordinate Bench in case of Seadrill International Ltd. V. ACIT (IT)-4(2)(1) in ITA No. 4700/MUM/2023 dated 07.01.2025 in the context of section 44BB of the Act. It was submitted that the provisions of section 44B and section 44 BB of the Act are similarly worded and the ratio laid down in these decisions therefore squarely applies in the facts of the present case and in light of the same, the assessee be allowed the necessary relief by excluding the GST as part of the gross receipts so brought to tax by the Ld. AO for the purposes of presumptive taxation u/s 44BB of the Act. 9. Per contra, the Ld. DR relied on the or....
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....e assessee on account of the carriage of passengers, livestock, mail or goods shipped at any port outside India. Explanation For the purposes of this sub-section, the amount referred to in clause (1) or clause (ii) shall include the amount paid or payable or received or deemed to be received, as the case may be, by way of demurrage charges or handling charges or any other amount of similar nature. 9. At the time of hearing our attention was drawn to Circular No.169 dated 23/06/1975 explaining the rationale of Section 44B and amendment in Section 172 by Finance Act, 1975. For the sake of ready reference same is reproduced hereunder:- "37. Under the existing law, taxable profits of foreign shipping enterprises are determined by suitably apportioning their global profits between their Indian business and foreign business or on the basis of "voyage accounts". Difficult and complicated issues arise in such assessments, particularly in relation to depreciation (including unabsorbed depreciation of earlier years), the balancing charge/allowance and the apportionment of overhead expenses. With a view to simplifying and rationalizing the assessments in such cases, the Finance Act, 197....
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....deemed to be received, in India on account of the carriage of passengers, live-stock, mail or goods shipped at any port outside India. ..." Notes on Clauses Clause 8 seeks to insert a new section 44 in the Income-tax Act. Under the new section, in the case of a non-resident, the profits and gains from the business of operation of ships will be taken at amount equal to 71/2 per cent of the amount paid or payable to the assessee or to any other person on his behalf, on account of the carriage of passengers. live-stock, mail or goods shipped at any Indian port as also of the amount received, or deemed to be received, in India on account of the carriage of passengers, livestock, mail or goods shipped at any port outside India. This amendment will take effect from 1st April, 1976 and will accordingly apply in relation to assessment year 1976-77 and subsequent years." 10. The entire controversy which now has risen in this year is the interpretation of Section 145A inserted by the Finance Act 2018 with retrospective effect from 01/04/2017 on the issue of applicability of income computation and disclosure standards. The said provision of Section 145A reads as under:- 145A"For the....
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....bring the goods or services to the place of its location and condition as on the date of valuation, 12. Ergo, amendment to Section 145A was to include taxes of cost of sales / services for valuation of inventory to align with ICDS-2 and nowhere it can be inferred that it tantamount to change the computation mechanism on presumptive basis of taxation. Earlier Section 145A was inserted to bring clarity with the method of accounting for valuation of purchase and sale of goods and inventory, to determine business income. It in effect. provides that for inventory valuation, the amount actually paid or incurred by way of any tax, duty, cess or fees shall be included therein. Earlier there were various litigations whether the valuation of closing stock of the inputs, work-in-progress and finished goods must necessarily include the element for which MODVAT credit is available, and in order to ensure that the value of opening and closing stock reflect the correct value, the amendment was brought in Section 145A by the Finance Act, 1998. This was explained then by the CBDT Circular in the following manner:- "Method of accounting in certain cases 52.1 The issue relating to whether the v....
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.... deemed income has to be computed on specified amounts only and nothing more can be added which is not within the scope of Section 44B of the Act because Section 44B provides that non-resident is engaged in the business of operation of ships, then sum equal to 7.5% of the amounts referred to Sub-section (2) has to be computed for the purpose of deemed profits. These amounts are firstly, the amount paid or payable (whether in or out of India) to the assessee or to any person on his behalf on account of carriage of passengers, livestock, mail or goods shipped at any port in India; and secondly, the amount received or deemed to be received in India by or on behalf of the assessee on account of the carriage of passengers, livestock, mail or goods shipped at any port outside India. Thus, what is relevant for computing the deemed income u/s. 44B is the amount paid or payable or amount received or deemed to be received on account of carriage of passengers, etc. 15. Section 145A of the Act takes into consideration "valuation of sale or purchase of goods/services and of inventory", whereas Section 44B (2) considers specified amounts i.e. "amount paid or payable on account of the carriage ....
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....s under: "In Lakshmi Machine Works (supra), the Supreme Court approved the decision of the Bombay High Court in 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 44BB of the Act. 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 44BB of the Act. The Court accordingly holds that for the purposes of computing the Presumptive income of the Assessee for the purposes of Section 44BB of the Act, the service tax collected by t....
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....tion 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 Taxman 818/[2016] 380 ITR 130 (Delhi). On its literal construction, Section 44BB(2) would only be the amount paid by the ONGC to the assessee on account of (i) provision of services in connection with or (ii) supply of plant and machinery on hire used in, the prospecting, extraction and production of mineral oils. As the amount reimbursed by the ONGC, towards the service tax paid by assessee earlier to the Government, is not an amount paid to the assessee towards the services provided by the latter in connection with the prospecting, extraction or production of mineral oils, it is not required to be included in the amounts specified in clauses (a) and (b) of Section 44BB(2)." 18. Apart from that in the case of the assessee itself the Tribunal have consistently has been holding that service tax being in the nature of statutory payment does not involve any element of profit therefore, cannot be included in the gross receipts. 19. The case of the department before us is that the judgments rendered in the context of service tax could no....
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....within such time as may be prescribed. Rule 3(1) of the Cenvat Credit Rules provisions of this Chapter shall apply to such person to the extent so 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 received b. Service tax collected in excess (unjust enrichment) Both under the Service Tax Law and GST Law, there are adequate provisions which requires timely deposit of taxes collected including excess taxes collected. Where the taxes collected and not deposited, there are provisions which enables recovery of taxes by the Government. Relevant extract of the provisions is reproduced hereunder: Reference under the law, rules, etc Reference under the law, rules, etc. Section 73A (1) and (2) Finance Act, 1994 Section stipulates 73A(1) that any person who is liable to pay service tax, and has collected any amount in excess of the service assessed tax or determined and paid on any taxable service, from recipient the of taxable service as re....
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....reunder the provisions of, among others, sections 12A and 12B of the Central Excise Act shall apply, so far as may be, in relation to service tax as they apply in relation to a duty of excise. Section 49(9) of CGST Act, 2017 Every person who has paid the tax on goods or services or both under this Act shall, unless the contrary is proved by him, be deemed to have passed on the full incidence of such tax to the recipient of such goods or services or both. Rule 4A of Service Tax Rules Service provide shall issue an invoice which shall mention the amount of Service tax thereon. Payable Section 15 of CGST Act, 2017 Rule 46 of CGST Rules, 2017 Every person who has collected from any other person any amount as representing the tax under this Act, and has not paid the said amount the Government, shall forthwith pay the said amount to the Government, irrespective whether supplies of the in respect of which such amount was collected are ST taxable or not Section 12B of Central Excise Act, 1994 Section provides 12-B that every person who has paid the duty of excise on any goods under the Act shall, unless the contrary is proved by him, be deemed to have passed on the full in....
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....023 Section 194BA 2. Circular No. 20 of 2023 Section 194-O 3. Circular No. 12 of 2022 Section 194R 4. Circular No. 13 of 2022 Section 194S 5. Circular No. 13 of 2021 Section 194Q 22. If we accept the contention of the revenue, then it would lead to a situation where calculation of tax of reimbursement of taxes would tantamount to collection of tax on taxes. Section 44B(2) of the Act provides for deemed taxation on amount paid or payable / received on account of 'carriage' of goods, passengers, etc. Further, the Explanation thereto clarifies that the amounts in connection with the carriage would include 'demurrage charges', 'handling charges and other amounts of a 'similar nature". Thus, what is sought to be included u/s 44B are the charges' recovered from the consignor of the cargo/ customer as a consideration for transportation from a port in India to outside India and vice versa. 23. GST being a mandatory 'statutory levy' cannot be said to be in the nature of 'charges' by the shipping Company towards the carriage. The incidence of GST is on account of taxability of services under the relevant parliamentary statu....
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....r the head "Profits and gains of business or profession..." in section 145A signifies that the essence of section is to compute income under the head profits and gains of business or profession which is computed as per provisions of Section 29 of the Act. On the contrary, provisions of Section 44B (1) starts with a non obstante clause "Notwithstanding anything to the contrary contained in sections 28 to 43A...". Since Section 44B overrides the provisions of Section 29 of the Act, therefore in our opinion Section 145A is not applicable for computing deemed income under Section 44B. 27. Thus, the decision of the Hon'ble Bombay High Court will not be applicable in this case same was not rendered in the context of Section 44B and in any case in so far as the observation of the Hon'ble High Court that any tax or levy cannot be part of turnover receipts unless it is not paid, is not applicable in the case of the assessee. It has been brought to record that assessee discharged its GST liability of Rs. 96,51,49,085 through payment of tax to the Government Treasury and input tax credit and this has been demonstrated from the copies of form GSTR 9 and annual GST re-conciliation statement. ....
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....held that the benefit of deduction of tax can be claimed by the assessee in view of section 43B(a), while computing its income under section 28, and the provisions of section 43B would prevail notwithstanding anything contained in, among others. Thus, it has been stated that invoking the provisions of Section 43B under Section 44B shall force the assessee to prepare a memorandum account wherein the specified amounts are credited and adjusted by GST due to Section 145A and correspondingly, GST discharged before the due date of filing of tax return specified under Section 139 of the Act is debited to such account. However, preparation of such memorandum account is neither required under the Act nor can replace the express provisions of Section 44B of the Act. We therefore, find merits in such contention of the ld. Counsel that if it is held that Section 145A are applicable for computing deemed income u/s. 44B and GST is added to the specified amounts and provisions of Section 29 are invoked, then deduction of GST paid should be allowed while computing income under the head "profits and gains" of business or profession as per Section 43B. Even otherwise also Section 44B over rights Se....