DCIT (INTERNATIONAL TAXATION), DEHRADUN vs. M/S. SCHLUMBERGER ASIA SERVICES LTD., DEHRADUN

This appeal by the revenue is preferred against the order of the CIT(A)-2, Noida dated 31.10.2016 pertaining to A.Y. 2012-13.

The grievance of the revenue read as under :- (i) Whether the CIT (A) has eared, on the facts and in the circumstances of the case, in holding that the amount received by the assessee on account of ‘equipment lost in hole’ is not includible in the gross revenue for the purpose of computation of profits under the presumptive provisions of section 44BB of the Act, when the said provisions are a complete code of taxation in themselves and do not distinguish between revenue and capital receipts having made allowance for expenditure including depreciation on capital assets to the extent of 90% of gross revenue. (ii) Whether the CIT (A) has erred in not appreciating the fact that the amount received by the assessee on account of ‘equipment lost in hole’ is infact the reimbursement of expenses and hence includible in the gross revenue for the purpose of computation of profits as per the provisions of section 44BB of the Act in accordance with the spirit of the ratio of the judgment of Hon’ble Uttarakhand High Court in the case of CIT Vs. Halliburton offshore Services Inc. (300 ITR 265). (iii) Whether the CIT (A) has erred in placing reliance on the order of Hon’ble Uttarakhand High Court in the case of assessee for the AY 1996-97, when the SLP filed by the Revenue against the said judgment is still pending before the Hon’ble Supreme Court. (iv) Whether on the facts and in the circumstances of the case in law, the CIT (A) has erred in holding that receipts on account of services tax are not includible in gross revenue of the assessee for the purpose of computation of profits under the provisions of section 44BB of the IT Act, 1961. (v) Whether the CIT (A) has erred in not appreciating the fact that section 44BB of the Act is self-contained code providing for computation of profit at a fixed percentage of gross receipts of the assessee and all the deductions and exclusions from the gross receipts are deemed to have been allowed to the assessee. (vi) Whether the CIT (A) has erred in not appreciating the fact that once the receipts are offered to tax u/s 44BB of the Act which provides for computation of profits on gross basis, there is no scope for computing or re-computing the profits by excluding any part of the receipts from the total turnover as the same would amount to defeating the very purpose of providing for a presumptive scheme of taxation u/s 44BB of the Act and obviating the need for maintaining accounts for individual receipts, payments etc. (vii) Whether the CIT (A) has erred in ignoring the ratio of the judgment in the case of M/s Chowringhee Sales Bureau (P) Ltd. (82 ITR 542, SC) wherein the Hon’ble Apex Court has held that the Sales Tax collected by an assessee in the ordinary course of its business forms part of its business receipts. Owing to the inherent similarity in the nature of sales tax and service tax, the ratio of the judgment in the said case is directly applicable to the instant case. (viii) The appellant prays for leave to add, amend, modify or alter any grounds of appeal at the time of or before the hearing of the appeal.

The grievance can be summarized in following two categories :- (i) Whether the amount received by the assessee on account of ‘equipment lost in hole’ is not includible in the gross revenue for the purpose of computation of profits under the presumptive provision of section 44BBof the Act. (ii) Whether receipts on account of service tax are not includible in gross revenue.

At the very outset, the counsel for the assessee stated that the impugned issues are squarely covered in favour of the assessee and against the revenue by the decision of the Hon’ble Uttarakhand High Court which has been followed by the first appellate authority.

Per contra the DR could not bring any distinguishing decision in favour of the revenue.

We have given a thoughtful consideration to the orders of the authorities below qua issue.

The underlying facts in the first issue are that the AO has considered the receipts on account tools lost in hold as includible in the gross receipts. The case of the assessee is that the said receipt is of capital in nature and hence not chargeable to tax. This issue has been decided by the Hon’ble Uttarakhand High Court in asessee’s own case which has been confirmed by the Hon’ble Supreme Court in 399 ITR 1. The relevant findings of the Hon’ble Supreme Court read as under :-

As the CIT(A) has followed the earlier order of this Tribunal which has been upheld by the Hon’ble Uttarakhand High Court and subsequently by the Hon’ble Supreme Court we do not find any error or infirmity in the findings of the CIT(A) grounds relating to the first issue are dismissed.

Facts relating to the second issue are that the assessee has claimed that service tax has no profit element in it and is collected on account of statutory requirement and, therefore, it is not taxable u/s.44 BB of the Act. The AO took the view that service tax has the profit element and, therefore, includible in the gross turnover of the assessee. This issue has also been considered by the Hon’ble Uttarakhand High Court in assessee’s own case in 104 taxmann.com 353. The relevant findings read as under :-

Since the issue is now well settled in favour of the assessee and against the revenue we do not find any reason to interfere with the findings of the CIT(A). The grounds relating to this issue are also dismissed.

In the result, the appeal filed by the revenue is dismissed.

Decision announced in the open court in the presence of both the representatives on 01.07.2021.