TaxTMI 
TaxTMI 
2025 (12) TMI 1218
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.... of the assessee and covered by earlier decisions of the Tribunal. 4. Our reference was drawn to the decision of the Coordinate Bench for A.Y. 2021-22 (ITA No. 4670/Mum/2023 dated 21/03/2025) wherein the relevant findings read as under: "10. We have heard the rival contentions and perused the materials available on record. We find that the Coordinate Bench while considering a similar issue of inclusion of GST for the purposes of presumptive taxation u/s. 44B of the Act in the case of Orient Overseas Container Line Limited (Supra) has exhaustedly examined the matter and the relevant findings therein read as under: "8. We have heard both the parties at length, perused the relevant materials referred to before us. The controversy before is whether GST is to be included while computing the deemed profit u/s 44B. Section 44B is a special provision for computing profits and gains of shipping business in the case of non-residents. Prior to insertion of Section 44B, taxable profits of foreign shipping enterprises were determined by suitably apportioning their global profits between their Indian business and foreign business or on the basis of "voyage accounts" which le....
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....ge/allowance and the apportionment of overhead expenses. With a view to simplifying and rationalizing the assessments in such cases, the Finance Act, 1975 has made a special provision in section 44B for computing profits and gains of shipping business in the case of non-residents. Under this provision, profits and gains of a non-resident from the business of operation of ships will not be calculated in accordance with the provisions of sections 28 to 434 but will instead be taken at 7.5 per cent of the aggregate of the following amounts, namely: (a) 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 (b) 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. 38. ..... 39. Section 172 makes a special provision for the levy and recovery of tax in the case of any ship, belonging. to or chartered by a non-resident which carries passengers, livestock, mail or goods shipped at a port in India. ....
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....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 purpose of determining the income chargeable under the head "Profits and gains of business or profession" (i) the valuation of inventory shall be made at lower of actual cost or net realizable value computed in accordance with the income computation and disclosure standards notified under subsection (2) of section 145; (ii) the valuation of purchase and sale of goods or services and of inventory shall be adjusted to include the amount of any tax, duty, cess or fee (by whatever name called) actually paid or incurred by the assessee to bring the goods or services to the place of its location and condition as on the date of valuation; (iii) ... (iv) ... ... Explanation 1. - for the purposes of this section, any tax, duty, cess or fee (by whatever name called) under any law for the time being in force, shall include all such payment notwithstanding any righty arising as a consequence to such payment. 11. CBDT....
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...., 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 value of the closing stock of the inputs, work-in-progress and finished goods must necessarily include the element for which MODVAT credit is available, has been the matter of considerable litigation over the years. 52.2 Consistent with the other provisions of the Act, with a view to pot on end to this point of litigation and in order to ensure that the value of opening and closing stock reflect the correct value, a new section 1454 is inserted. This section provides that the valuation of purchase, sole and inventory shall be made in accordance with the method of accounting regularly employed by the assessee and such valuation shall be further adjusted to include the amount of any tars, duty, cess or fee (by whatever name called, actually paid or incurred by the assessee to bring the goods to the place of its location and condition as on the date ....
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....me 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 of goods shipped at any port in India" and "amount received or deemed to be received on account of the carriage of goods shipped at any port outside India. The terms amount paid or payable' and 'amount received or deemed to be received mentioned under Section 44B cannot be replaced with the term 'valuation' in the absence of any specific enabling provisions under Section 44B or Section 145A of the Act or any other provisions of the Act. For instance, Section 50CA is a deeming provision which enables replacement of consideration with 'fair market value' where the amount of consideration is less than the fair market value determined in a prescribed manner. 16. Thus, in our view adding GST component to the deemed income which has to be computed directly on specified amounts i.e. amount paid or....
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....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 the Assessee on the amount paid to it for rendering services is not to be included in the gross receipts in terms of Section 44BB(2) read with 44BB(I). The service tax is not an amount paid or payable, or received or deemed to be received by the Assessee for the services rendered by it. The Assessee is only collecting the service tax for passing it on to the government." 4. We are in respectful agreement with this view expressed by the Delhi High Court in which identical question had arisen. 5. In the result, Income Tax Appeal is dismissed. 17. Full Bench of Hon'ble High Court of Uttarakhand in case of DIT v. Schlumberger Asia Services Ltd. [2019] 414 ITR 1 (Uttarakhand) (FB) held that service tax paid earlier by the assessee to Gover....
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....s 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 not be applicable under the new GST. We find that though GST has replaced by erstwhile service tax law to provide a single tax of supply of goods and services right from manufacture to consumer. For the sake of ready reference Section 68 of erstwhile Service Tax law and Section 49 of CGST Act, the comparison is given herein below. Service Tax GST Section 68 of Finance Act, 1994 Section 68 relates to payment of service tax. Sub-section (1) thereof stipulates that every person, providing taxable service to any person, shall pay service tax at the rate specified in section 66B of Finance Act 2012 in such manner, and within such period, as may be prescribed. Notwithstanding anything contained in sub- sect....
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....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 representing service tax, shall forthwith pay the amount so collected to the credit of the Central Government. Section 73A(2)stipulates that where any person, who has collected any amount, which is not required to be collected, from any other person, in any manner representing as service tax, such person shall forthwith pay the amount so collected to the credit of the Central Government. Section 76 of CGST Act, 2017 (1) Notwithstanding anything to contrary in any direction the contained order or of any Appellate Authority or Appellate Tribunal or court or in any other provisions of this Act or the rules made thereunder or any other ....
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.... 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 incidence of such duty to the buyer of such goods Article 268A of constitution of India Taxes on services shall be levied by the Government of India and such tax shall be collected and appropriated by the government of India and the States in the manner provided in clause(2) Article 269A of constitution of India The value of a supply of goods or services or both of shall be the of transaction value, which is the price actually paid or payable for the said supply of goods or services or both the value of supply shall include any taxes, duties, cesses, fees and charges ....
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....n 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 statute i.e., GST laws and not on account of the business activities as envisaged in Sections 44B(2)(i) and 44B(2)(ii) of the Act. Otherwise, including GST in gross receipts for purpose of section 44B would be akin to charging income tax on GST i.e., tax on tax, which would promote cascading effect which cannot be the intent of legislation. 24. Further, a service provider acts in a fiduciary capacity out of statutory obligation casted upon it, while collecting service tax/GST on the behalf of exchequer and the same is ultimately deposited wi....
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.... 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. 28. Further, ld. DRP members also relied on CBDT Circular No. 10/2017 dated March 23, 2017 which discusses on the applicability of ICDS on determination of turnover by noncorporate taxpayers covered under presumptive taxation like Sections 44AD, 44AE, 44ADA, 44B, 44BB, 44BBA, etc. and stated that the service receipts and sales in the instant case are to be valued inclusive of taxes, as per ICDS guidelines. Relevant extract of Circular is hereunder :- "Question 3: Does ICDS apply to no....
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....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 Section 28-43A and 43B and therefore, in case if department seeks to add GST on the turnover for the purpose of calculating the profit u/s.44B, then, deduction u/s.43B has to be allowed if it is paid on or before the due date and similarly it can be disallowed once GST has not been paid within the due date. However, this is purely academic, contention which has been raised because we have already held that for the purpose of Section 44B only specified amount me....
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....on by the lower authorities in assessee's case. It is also noticed that the assessee in the present case has relied on judgments as have been considered by the coordinate bench in the above case. 11. In view of these discussions and the facts in assessee's case being identical to Orient Overseas Container Line Ltd. (supra), in our considered view the ratio laid down by the Co-ordinate Bench, the above case is applicable in assessee's case in the context of section 44BB of the Act also. Accordingly, we hold that the AO is not correct in treating the GST element which is collected as a separate item in the invoice as a statutory levy which is collected and deposited into the Government A/c, as income for the purpose of section 44BB of the Act. Therefore, the AO is directed to delete the addition made in this regard. The grounds raised by the assessee in this regard are allowed." 12. Following the aforesaid decisions so rendered by the Coordinate Benches, we are of the considered view that GST would not form part of gross receipts for the purposes of computing income under Section 44BB of the Act and the AO is hereby directed to exclude the amount of Rs 1....