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Income Tax Appellate Tribunal, “L”, BENCH MUMBAI
Before: SHRI R.C.SHARMA, AM & SHRI AMARJIT SINGH, JM
आदेश / O R D E R PER R.C.SHARMA (A.M): This is an appeal filed by the assessee against the order of CIT(A), -1 Mumbai dated 09/10/2014 for the assessment year 2011-12 in the matter of order passed u/s.143(3) r.w.s.144 of the IT Act. 2. The only grievance of assessee relates to including amount of service tax collected as part of the gross receipts for determining the taxable income of the assessee. 3. Rival contentions have been heard and record perused. 4. Facts in brief are that the assessee is engaged in the business of shipping, it was asked, vide order sheet noting dated 02.12.2013, to furnish the amount of service tax collected by it. The assessee was also M/s.Evergreen Marine Corporation (Taiwan) Ltd., asked to show cause, vide order sheet noting dated 20.01.2014' as to why the service tax so collected should not be considered as part of gross receipts for determining the taxable income as per provisions of section 44B. The assessee, in response to the show cause has furnished its submission on 29.01.2014. As per the submission the Service Tax Collected is Rs. 2,11,79,053/-. In respect of inclusion of Service Tax in gross receipts the relevant portion of assessee's submission is reproduce as under: "Thus the amount refer in Section 44B is the amount paid or payable to assessee and the amount received or deemed to be received in India by or behalf of the assessee on account of the carriage or passengers, livestock, mail or goods shipped at any port in India or outside India. Thus whenever a service tax is collected on behalf of government under the category Business Support Service or Business Auxiliary Service it is collected on behalf of government and not on account of the carnage of passengers, livestock, mail or goods shipped at any part in India or outside India. Hence, according to us service tax collected from customer on THC (BSS) and other charges (BUX) it is collected on behalf of government and not on account of the carriage of passenger, livestock, mail mail or goods shipped at any port in India or outside India.Thus, service tax collected cannot be part of income covered under Section 44B.”
However, AO did not agree with the assessee’s contention and held that Section 44B of the Act is a special provision and any deduction u/s 28 to 43A would not be considered for the purpose 'of 'determination of 'income u/s 44B. Under the provision of section 44B what is to be considered is the amount received or payable to the assessee and not the net income. No exclusion from the aggregate of amounts provided under sub-section 2 of section 448 has been permitted while computing M/s.Evergreen Marine Corporation (Taiwan) Ltd., the profits and gains of the shipping business in case of non-residents as per section 44B.
By the impugned order, CIT(A) confirmed the action of the AO.
Learned AR appearing on behalf of the assessee relied on the decision of Bombay High Court in case of Knight Frank India Pvt. Ltd., 96 CCH 0153 in support of the proposition that as per the provisions of Section 145A(a)(ii) service tax billed on rendering of services has no relation to any goods nor has anything to bring to the goods to a particular location. Reliance was also placed on the decision of ITAT- Mumbai Bench in case of Islamic Republic of Iran Shipping Lines 8845/M/2010 dated 20/04/2011 wherein it was held that service tax had no element of profit and the service provider is collecting the same from its customer on behalf of the Government and the same cannot be included in the total receipt for determining the presumptive income. Accordingly, AO was directed by the Tribunal not to include the amount of service tax in the total receipts for determining the income u/s.44B of the IT Act.
It was submitted by learned AR that in the case of Technip offshore 29 SOT 33, relied on by revenue, the decision of the Bombay High Court in the case of CIT v/s. Sudershan Chemical reported in 245 ITR Page 769 had not been considered, wherein it has been held that, excise duty and sales tax could not be included in the total turnover for the purpose of deduction u/ s. 80HHC of the Act, as that would reduce M/s.Evergreen Marine Corporation (Taiwan) Ltd., the profits and gains from export business artificially as there was no element of profit involved in levy of sales tax and excise duty.
Learned AR further submitted that the aforesaid view has been followed in the following decisions:-
A. Islamic Republic of Iran Shipping Line vs. DCIT (IT)- 3(1), Mumbai in ITA no. 8845/Mum./ 2010 passed by "I" Bench, Mumbai Tribunal dated 20th April, 2011. B. DDIT Circle 3(2), New Delhi vs. Mitchell Drilling International in ITA no. 698/Del.1 2012 passed by Delhi Tribunal dated 31St August, 2012. C. Hanjin Shipping Ltd. vs. ADIT (IT)- Range-3, Mumbai in ITA no. 8672/Mum./ 2010 passed by "H" Bench, Mumbai Tribunal dated 31st October, 2012. D. Orient Overseas Container Line Ltd. vs. ADIT (IT)- Range- 4, Mumbai reported in 60 SOT page 196. E. Islamic Republic of Iran Shipping Line vs. DCIT (IT)- 3(1), Mumbai in ITA no. 4877/Mum./2014 passed by "I" Bench, Mumbai Tribunal dated 17th February, 2016. F. Director ·of Income-Tax vs. Mitchell Drilling International Pvt. Ltd. reported in 380 ITR page 130 (Delhi H.C.).
We have considered rival contentions and carefully gone through the orders of the authorities below and also deliberated on the judicial pronouncements referred by lower authorities in their respective orders as well as cited by learned AR during the course of hearing before us. The issue under consideration is squarely covered by the decision of Bombay Bench in case of Islamic Republic of Iran Shipping Line in order dated 17/02/2016 wherein it was held that service tax having no profit element should not be included in turn over for the purpose of determining the income chargeable to be taxed u/s.44BB. Moreover, Hon’ble Uttarakhand High Court in case of M/s.Evergreen Marine Corporation (Taiwan) Ltd., Schlumberger Asia Services Ltd., held that service tax collected by the assessee on behalf of Government having no profit element cannot be included in the gross receipts for computing income u/s.44BB. Accordingly, we do not find any merit in the action of the lower authorities for including service tax in the gross turn over for the purpose of computing income u/s.44B of the IT Act.
In the result, appeal of the assessee is allowed.