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Income Tax Appellate Tribunal, DELHI BENCH: ‘B’ NEW DELHI
Before: SHRI G. D. AGRAWAL & SH. LALIET KUMAR
PER LALIET KUMAR, JM The present appeal is filed by the Revenue against the order dated 31/10/2016 passed by CIT(A)-2, Noida for Assessment Year 2012-13 on the following grounds:-
“((i) Whether on the facts and in the circumstances of the case and in law, the CIT (A) has erred in holding that receipts on account of service 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 I.T. Act, 1961.
(ii) Whether the CIT (A) has erred in not appreciating the fact that section 44BB of the Act is a 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.
(iii) 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.
(iv) 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”
It was the case of the Revenue that the Assessing Officer was correct as he has rightly taken into account the service tax into the gross revenue for determining the profit of the assessee for the year under consideration and, therefore, the action of the Ld. CIT allowing the appeal was in correct and for that purposes. The Ld. DR relied upon the decision of the Hon'ble Supreme Court in the matter of M/s Chowringhee Sales Bureau (P).. Vs. CIT(A)., West Bengal on 10th October, 1972 Equivalent Citations: 1973 AIR 376, 1973 AIR 376, 1973 SCR (2) 618.
Per Contra, the Ld. AR relied upon the decision of the Hon’ble Delhi High Court in the matter of DCIT Vs. Mid Shell Drilling International Pvt. Ltd. The Hon’ble Delhi High Court after considering the Bureau Pvt. Ltd. in Paragraph 14 & 18 held as under:-
“14. In the considered view of the Court, both the aforementioned decisions were rendered in the specific contexts in which the questions arose before the Court. In other words the interpretation placed by the Court on the expression "trading receipt' or 'turnover' in the said decisions was determined by the context. The later decision of the Supreme Court in CIT v. Lakshmi Machine Works (supra) which sought to interpret the expression 'turnover' was also in another specific context. There the question before the Supreme Court was "whether excise duty and sales tax were includible in the 'total turnover' which was the denominator in the formula contained in Section 80 HHC (3) as it stood in the material time?" The Supreme Court considered its earlier decision in Chowringhee Sales Bureau (supra) and answered the question in the negative. The Supreme Court noted that for the purposes of computing the 'total turnover' for the purpose of Section 80 HHC (3) brokerage, commission, interest etc. did not form part of the business profits because they did not involve any element of export turnover. It was observed: "just as commission received by an assessee is relatable to exports and yet it cannot form part of 'turnover', excise duty and sales-tax also cannot form part of the 'turnover'." The object of the legislature in enacting Section 80 HHC of the Act was to confer a benefit on profits accruing with reference to export turnover. Therefore, "turnover" was the requirement. "Commission, rent, interest etc. did not involve any turnover." It was concluded that 'sales tax and excise duty' like the aforementioned tools like interest, rent etc. 'also do not have any element of 'turn over".
The Court further notes that the position has been made explicit by the CBDT itself in two of its circulars. In Circular No. 4/2008 dated 28th April 2008 it was clarified that "Service tax paid by the tenant doesn't partake the nature of "income" of the landlord. The landlord only acts as a collecting agency for Government for collection of Service Tax. Therefore, it has been decided that tax deduction at source) under sections 194-1 of Income Tax Act would be required to be made on the amount of rent paid/payable without including the service tax.' In Circular No. 1/2014 dated 13th January 2014, it has been clarified that service tax is not to be included in the fees for professional services or technical services and no TDS is required to be made on the service tax component under Section 194J of the Act.”
He submitted that the appeal of the Revenue is required to be dismissed and he is further drawn our attention to the decision of the Co-ordinate Benche in the case of DCIT Vs. Trans off shore International Ventures Ltd. where the identical issue was decided against the Revenue.
We have careful considered the rival contentions of parties and perused the material available on record. In our view that the judgment of the Jurisdictional High Court in the matter of Dolphin Drilling International Pvt. Ltd. (Supra) was bang on the issue, wherein the decision of the Hon'ble Supreme Court in the matter of M/s Chowringhee Sales Bureau (P). Vs. CIT(A).
West Bengal (Supra) was considered and there after the Hon'ble High Court was held service tax cannot form part of the gross revenue, for the purpose to computing the profit and gains under Section 44BB. In view of the above and respectfully following the judgment of the Hon’ble Jurisdictional High Court we dismiss the appeal of the Revenue
In the result, the appeal filed by the Revenue is dismissed.
Order pronounced in the open court on /8/2018 Order pronounced in the Open Court on 14th August, 2018.