HANJIN SHIPPING COMPANY LTD,MUMBAI vs. DCIT (IT) RG 2(2)(2), MUMBAI

आदेश / O R D E R

PER RAMIT KOCHAR, Accountant Member This appeal, filed by the assessee, being 31.01.2017 passed by the learned Assessing Officer (hereinafter called “the AO”) u/s 143(3) r.w.s. 144C(13) of the Income-tax Act,1961 (hereinafter called “the Act”) in pursuance of directions dated 29.11.2016 issued by learned Dispute Resolution Panel-1(WZ), Mumbai (hereinafter called “the DRP”), for assessment year 2013-14.

3. The assessee is a company incorporated and registered in Seoul, Korea . The assessee is engaged in the business of global maritime container transportation. The assessee has chosen to be taxed u/s. 44B of the Act with respect to its income from operation of ship on presumptive basis read with Article 9 of the DTAA between India and Korea. The short solitary question which arose in this appeal is whether service tax of Rs. 35,25,40,620/- collected by the assessee and paid to Government during the relevant period is to be included in 2 the turnover while computing presumptive income u/s 44B of the 1961 Act from operation of ships. The assessee collected said amount of Rs. 35,25,40,620/- towards service tax which is stated to be deposited with Government Treasury and the assessee excluded said sum from the aggregate amount received from the business of operations of ships while computing presumptive tax u/s 44B of the 1961 Act. The learned DRP was of the view that this service tax component of Rs. 35.25 crore is to be included in the gross receipts for the purpose of presumptive taxation as per the provision of Section 44B of the Act.

5. Aggrieved, the assessee has come in an appeal before the tribunal and none appeared on behalf of the assessee. The Ld. DR brought to our notice directions issued by learned DRP dated 29.11.2016 u/s 144C(5) of the 1961 Act wherein there is reference to the order of the tribunal in assessee’s own case in and 7010/Mum/2011 for AY 2007-08 and 2008-09 respectively wherein the issue was decided by tribunal in favour of the assessee by holding that service tax shall not form part of the gross receipts which are to be considered for computing presumptive tax u/s 44B of the 1961 Act.

“ The present appeal has been preferred by the assessee against the order dated 24.06.2013 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2010-11. 2. The assessee has taken the following grounds of appeal: “1. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) - 10 ('CIT(A)-10') has grossly erred in confirming the actions of the Assessing Officer of making addition of Rs.11,34,14,190/- being the amount of Service Tax to the total revenue for the computation of profit under Section 44B of the Income-tax Act, 1961 ('the Act').

2. On the facts and in the circumstances of the case, the learned CIT(A) - 10 has legally erred in not following the order of Income Tax Appellate Tribunal (ITAT) in appellants own case for A.Y.2008-09 and A.Y.2007-08.

3. On the facts and in the circumstances of the case, the learned CIT(A) - 10 has legally erred in not granting reasonable and adequate opportunity to the Appellant to present its case before passing the order and the said order is being passed in violation of principle of natural justice is liable to be quashed. The Appellant craves leave to add, alter, amend or withdraw all or any of the Grounds of pa herein and to submit such statements, documents and papers as may be considered necessary either at or before the appeal hearing.”

4. Being aggrieved by the above action of the AO, the assessee filed appeal before the Ld. CIT(A). The Ld. CIT(A), relying upon the decision of the co-ordinate bench of the Tribunal in the case of “M/s. China Ship Container Lines (Hong Kong) Company Ltd.” in dated 23.08.13, upheld the action of the AO in including the service tax receipt in the gross receipts taken for computing the presumptive profits of the assessee. Being aggrieved, the assessee has come in appeal before us.

On the other hand, the Ld. D.R. has relied upon the finding of the lower authorities.

6. We have heard the rival contentions and have also gone through the records. We find that the co-ordinate bench of the Tribunal in the own case of the assessee in earlier assessment year A.Y. 2007-08 vide order dated 31.10.12 has observed that the decision of the Delhi Bench of the ITAT in the case of “Technip Offshore Contracting BE” (supra) has already been considered by the Mumbai Bench of the Tribunal in the case of “Islamic Republic of Iran Shipping Lines vs. Dy. Director of Income Tax” 11 taxman.com 349 wherein it has been held that the service tax since has been collected by the assessee on behalf of the government which is a statutory liability and does not involve any element of profits and accordingly the same cannot be included in the total receipts for determining the presumptive income. The co- ordinate bench of the Tribunal, thus, in the own case of the assessee has decided the issue in favour of the assessee. Following the said decision, the co-ordinate bench of the Tribunal, in the own case of the assessee for A.Y. 2008-09, has again observed that the issue is covered in the assessee’s own case for A.Y. 2007-08 and thus has upheld the order of the Ld. CIT(A) holding that the service tax since is a statutory liability and does not involve an element of profit and the same being collected by the service provider from his customers on behalf of the government, accordingly cannot be included in the total receipts for determining the presumptive income under section 44B of the Act. Similar view has been taken by the DRP in the own case of the assessee for A.Y. 2012- 13. The co-ordinate bench of the Tribunal in the case of “Islamic Republic of Iran Shipping Lines vs. Dy.DIT” for A.Y. 2010-11 vide order dated 17.02.16 has observed that though the co-ordinate bench of the Tribunal in the case of M/s. China Ship Container Lines (Hong Kong) Company Ltd.” (supra) has decided the issue in favour of the Revenue, however, the Hon’ble Delhi High Court, which is a higher authority, in the case of “DIT vs. Mitchell Drilling International Pvt. Ltd.” (supra) has decide the issue in favour of the assessee. The co- ordinate bench of the Tribunal has further observed that since the issue under consideration has already been decided in the own case of the assessee and further that the Mumbai Bench of the Tribunal in the case of “Marubeni Corporation vs. DCIT” (2014) 44 Taxman.com 22 (Mum.) has held that as a matter of precedent the Tribunal is bound to follow the decision rendered by the Tribunal in the own case of the assessee in earlier year, unless, there is a change in law, change in facts and circumstances of the case or the same is contrary to the decision rendered by a jurisdictional high court or apex court. In the absence of any of such circumstances, the earlier decision of the Tribunal in assessee’s own case has to be applied. In view of the ratio of law laid down by the co-ordinate bench of the Tribunal in the case of “Marubeni Corporation vs. DCIT” (supra) which has been further followed by the Tribunal in the case of “Islamic Republic of Iran Shipping Lines” for A.Y. 2010-11 (supra) and in the light of decision of the Hon’ble Delhi High Court in the case of “DIT vs. Mitchell Drilling International Pvt. Ltd.” (supra), we hold that service tax collected by the assessee and paid to the government account having no profit element, cannot be included in the gross receipts for computation of income under section 44B of the Act. This issue is accordingly decided in favour of the assessee.

Respectfully following the aforesaid orders of the tribunal in assesses’s own case for AY 2010-11 which has elaborately discussed the issue in length , we allow the appeal of the assessee by holding that the service tax collected by the assessee and paid to the government account having no profit element , cannot be included in the gross receipts from operation of ships for computation of income u/s 44B of the 1961 Act . Merely because the Revenue has filed an appeal before the Hon’ble Bombay High Court is not sufficient for us to taken a different view as no judgment of the Hon’ble High Court/ Hon’ble Apex Court holding in favour of Revenue has been brought on record by learned DR. This issue is accordingly decided in favour of the assessee. We order accordingly.