DCIT - (IT) -2(3)(2), MUMBAI vs. GLOBAL SANTAFE DRILLING COMPANY, MUMBAI

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ITA 5638/MUM/2018Status: DisposedITAT Mumbai09 December 2019AY 2015-164 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that service tax is not liable to be included in gross receipts for the purpose of Section 44BB. The CIT(A)'s decision to exclude service tax was found to be judicious and correct.

What were the facts?

The revenue appealed against the CIT(A)'s order which excluded service tax from gross receipts for computing income under Section 44BB. The assessee had offered income on a presumptive basis, and the Assessing Officer had added back the service tax to the net receipts.

What were the issues?

Whether service tax collected by the assessee should be included in the gross receipts for the computation of presumptive income under Section 44BB of the Income Tax Act.

Which sections of the Income-tax Act were involved?

Section 44BB

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “G” BENCH, MUMBAI

Before: SHRI RAJESH KUMAR, AM & SHRI AMARJIT SINGH, JM

Hearing: 02/12/2019Pronounced: 09/12/2019

O R D E R

PER AMARJIT SINGH, JM:

1.

The revenue has filed the present appeal against the order dated 24.07.2018 passed by the Commissioner of Income Tax (Appeals) -56, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y.2015- 16.

2.

The revenue has raised the following grounds: - "

1) On the facts and circumstances of the case, ld. CIT(A) erred in holding that the service tax should be excluded from gross receipts for the purpose of computation of income u/s 44BB without appreciating the fact that word used in the section is A.Y.2015-16 aggregate of the amounts and aggregate intends combined or collective and also the fact that an appeal has been admitted by the jurisdictional High Court on the similar grounds in the case of Hanjin Shipping Co. Ltd.

2. The appellant prays that the order of the Ld. CIT(A) on the above grounds be set aside and that of the AO be restored.

3. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary.”

3. The brief facts of the case are that the draft assessment order u/s 143(3) r.w.s. 144C(1) of the Act was passed on 27.11.2017 and was duly served upon the assessee. In view of the relying upon the draft assessment, the assessee has elected not to file the objections before the DRP and reserves the right to file an appeal before the CIT(A) on receipt of the final assessment order to be issued u/s 144C(3) of the Act. In the return of income, the assessee offered an amount of Rs.52,69,18,790/- as its receipt on gross basis and has offered the same u/s 44BB on presumptive basis @ 10% of the same and accordingly an amount of Rs.526,918,793/- was offered to tax. The assessee also reported gross revenues of Rs.6,125,752,616/- which includes receipts on account of service tax amounting to Rs.856,564,689/-. Thereafter, notice was given and after the reply of the assessee, an amount of Rs.856,564,689/- was added to the net receipts. The total income of the assessee was assessed to the tune of Rs.612,575,260/-. Feeling aggrieved, the assessee filed an appeal before the CIT(A) who allowed the claim of the assessee, therefore, the revenue has filed the present appeal before us.

4.

We have heard the argument advanced by the Ld. Representative of the parties and perused the record. The Ld. Representative of the revenue has argued that the service tax was wrongly excluded from the gross receipt A.Y.2015-16 for the purpose of computation of income u/s 44BB of the Act, therefore, the finding of the CIT(A) is not justifiable, hence, is liable to be set aside. However, on the other hand, the Ld. Representative of the assessee has strongly relied upon the order passed by the CIT(A) in question. Before going further, we deem it necessary to advert the finding of the CIT(A) on record.:-

5 On identical facts and circumstances decision is taken in appellate order no. CIT(A)/DCIT(IT)-2(3)(2)/2016-17/316-G dated 25.01.2018. The matter being same on account of same reasons the same decision applies. The AO is directed to excluded service tax portion in computing income under section 44BB. Accordingly, the ground is allowed.

5.

On appraisal of the above mentioned finding, we noticed that the CIT(A) has allowed the claim of the assessee on the basis of his earlier decision for the A.Y. 2016-17 dated 25.01.2018. At the time of argument, the Ld. Representative of the assessee has placed reliance upon the decision of Hon’ble Delhi High Court in the case of titled as Director of Income Tax-1 Vs. Mitchell Drilling International in dated 28.09.2015 and the decision of the Mumbai Bench in the case of M/s. Weatherford Drilling Vs. DCIT in ITA. No.495/M/2017 dated 20.06.2018. However, on the other hand, the Ld. Representative of the Department has placed reliance upon the decision of the Mumbai Tribunal in the case of China Shipping Container Lines Vs. Assistant Director of Income Tax, Mumbai. No doubt, the law relied by the Ld. Representative of the revenue speaks that the service tax is the part and parcel of the profit, therefore, the same was subject to presumptive profit and gain u/s 44BB of the Act. The issue has been considered by Hon’ble Delhi High Court in the case of Mitchell Drilling International (supra), Subsequently, by ITAT A.Y.2015-16 Mumbai Bench in the case of M/s. Weatherford Drilling Vs. DCIT in which it has been clearly held that the service tax is not liable to be include in gross receipt in terms of Section 44BB(1) r.w. Section 44BB(2) of the Act because the same is not part of the gross receipt for the purpose of depositing the presumptive tax. Taking into account all the facts and circumstances, we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage. Accordingly, we decide all the issues in favour of the assessee against the revenue.

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