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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
आयकर अपीलीय अधिकरण “B” न्यायपीठ म ुंबई में। IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, MUMBAI श्री महावीर स िंह, न्याययक दस्य एविं श्री रसमत कोचर लेखा दस्य के मक्ष । BEFORE SRI MAHAVIR SINGH, JM AND SRI RAMIT KOCHAR, AM Aayakr ApIla saM./ (inaQa-arNa baYa- / Assessment Year 2012-13) Dy. Commissioner of Income Tax …… (ApIlaaqaI- / Appellant) (International Taxation)-3(3)(1), Mumbai Vs. M/s Nabors Drilling International Limited C/o Nangia & Co. (CA) …… (p`%yaqaaI- / Respondent) Unit No. 1101, 11th Floor, B Wing, Peninsula Business Park, Ganpatrao Kadam Marg, Lower Parel, Mumbai-400 013 स्थायी लेखा िं./PAN No. AADCN7265N अपीलाथी की ओर े / Appellant by : Shri Anand Mohan, DR प्रत्यथी की ओर े / Respondent by : None ुनवाई की तारीख / Date of hearing: 30-08-2018 घोषणा की तारीख / Date of pronouncement : 30-08-2018 AadoSa / O R D E R PER MAHAVIR SINGH, JM:
This appeal by the Revenue is arising out of the order of Commissioner of Income Tax (Appeals)-57, Mumbai [in short CIT(A)], in appeal No. CIT(A)-57/Arr.161/2016-17 dated 23.01.2017. The Assessment was framed by the Dy. Commissioner of Income Tax (IT)- Circle-3(3)(1), Mumbai (in short ‘DCIT’/ AO) for the A.Y 2012-13 vide order dated 19.05.2015 under section 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’).
2. The only issue in this appeal of Revenue is against the order of CIT(A) in holding that the service tax collected by the assessee from its client will not form part of its total turnover of the assessee for computing profit under section 44BB of the Act. For this Revenue has raised following three grounds: - “1. Whether on the facts and the circumstances of the case in law, the Ld. CIT(A) is correct in holding that service tax collected by the appellant from its clients will not form part of its turnover for computing profit u/s 44BB of the Act without appreciating the fact that: a) The Service Tax collected by the assessee is liable to be included in the gross receipt of the assessee for the purpose of Taxation as per the provisions of Section 145A of the Act. b) Service Tax is an integral part of sale receipts and thus form part of total turnover.
The Appellant prays that the order of the Ld. DRP on the above ground(s) be set aside and that of the Assessing Officer be restored.
The Appellant prays that the appeal is maintainable in this case in view of Circular No. 21/2015 dated 10. 12.2015 of the CBDT..”
Brief facts are that the assessee is a non-resident company and has executed contract with Gujarat State Petroleum Corporation Limited along with its Co-Venture Jubilant Enpro Limited and Geo Global Resources entered into a PSE for KG-OSN/2001/3 block with the Govt. of India. For the purpose of carrying out of Drilling, testing, completion and way of provision of a rig, as per the Assessing Officer. The AO included the service tax received from clients in the total turnover while computing the income under section 44BB of the Act.
We find that this issue is squarely covered in favour of assessee by the decision of Hon’ble Delhi High Court in the case of DIT vs. Mitchell Drilling International Pvt. Ltd. [2016] 380 ITR 130 (Del) and also CBDT Circular No. 1/ 2014 dated 13.01.2014, wherein it is clarified as under: - “2. Attention of CBDT has also been drawn to the judgement of the Hon'ble Rajasthan High Court dated 1-7-2013, in the case of CIT (TDS) Jaipur v. Rajasthan Urban Infrastructure (Income-tax Appeal No.235, 222, 238 and 239/2011), holding that if as per the terms of the agreement between the payer and the payee, the amount of service tax is to be paid separately and was not included in the fees for professional services or technical services, no TDS is required to be made on the service tax component u/s 194J of the Act.
3. The matter has been examined afresh. In exercise of the powers conferred under section 119 of the Act, the Board has decided that wherever in terms of the agreement/contract between the payer and the payee, the service tax component comprised in the amount payable to a resident is indicated separately, tax shall be deducted at source under Chapter XVII-B of the Act on the amount paid/payable without including such service tax component” 5. Further, the CBDT has also clarified its position vide its earlier Circular No. 4/2008 dated 28.04.2008 and the clarification reads as under: - “18. the Court further notes that the position has been made explicit by the CBDT in itself in two of its circulars. In Circular No. 4/2008 dated 28th April 2008 it vis: 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 (TDS) under sections 194-I 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.”
Further, we find that the Uttarakhand High Court in the case of DIT vs. Schlumberger Asia Services Ltd. (2009) 317 ITR 156 (Uttarakhand) had held that customs duty, unlike amounts received towards reimbursement, would not be includible in the total turnover for computing profits u/s.44BB of the Act