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Income Tax Appellate Tribunal, DELHI BENCH ‘G’, NEW DELHI
Before: SH. H. S. SIDHU & SH. N. K. BILLAIYA
ITA No. 4467/Del/2014 and CIT (A) for A. Y. 2007-08 and 2008-09 and is an appeal filed by the revenue in the case of different assessee preferred against the order of the CIT (A), Noida pertaining A. Y. 2012-13.
Since in all these appeals common issues are involved they were heard together and are disposed of by this common order for the sake of convenience and gravity.
In assessee’s appeal the common grievance reads as under :-
Based on the facts and circumstances of the case, Schlumberger Asia Services Limited (hereinafter referred to as ‘SASL’ or the ‘Appellant’) respectfully craves leave to prefer an appeal against the order dated 30 May 2014 passed by the Commissioner of Income Tax (Appeals) - II [hereinafter referred to as the ‘learned CIT(A)’] under section 250(6) of the Income-tax Act, 1961 (hereinafter referred to as the ‘Act’) (received by the Appellant on June 14, 2014) on the following grounds:
Appeal not maintainable
The learned CIT(A) has erred on facts and in law in holding that appeal filed by SASL is not maintainable since the impugned order is passed by Assessing Officer (‘AO’) on the alleged Association of Persons (‘AoP’) of SASL and Transocean Offshore Deepwater Drilling Inc. (‘TODDI’) and not against the Appellant (ie SASL). The learned CIT(A) has not appreciated that the Appellant is an aggrieved party as a result of the impugned order.
2. The learned CIT(A) has erred on facts and in law in dismissing the said appeal on the ground that it is covered by the order passed in case of appeal
filed by the alleged AoP of SASL and TODDI issued on 20 May 2013. The learned CIT(A) has erred in not allowing the said appeal as relief has already been granted in the AoP order. 3. The learned CIT(A) failed to deal with any of the grounds of appeal raised in the Appeal memorandum which may kindly be considered as set out herein, the same are not being repeated herein for the sake of brevity, including grounds 1 to 5 therein.
At the very outset the counsel for the assessee pointed out that impugned issue stand decided in favour of the assessee and against the revenue by the order of the bench in assessee’s own case in and 105/Del/2012 for A. Y. 2008-09.
We find force in the contention of the counsel the relevant finding of the coordinate bench reads as under :-
“4.5. Thus respectfully following the decision of Hon’ble Delhi High Court in the case of Linde AG Linde Engineering Division vs. DDI (supra) we hold that Consortium Agreement dated 04/05/03 between Slumberger Asia Services Ltd and Transocean Offshore Deep water Drilling Pvt. Ltd., do not constitute an AOP. 4.6 From the assessment order it is observed that Ld.AO has taxed the revenue under section 115 A at 10%. Section 1 ISA presupposes the rendering of technical services by assessee and now with the decision of Hon’ble Supreme Court in the case of ONGC Ltd (supra) the issue stands settled as on date, regarding prospecting for or extraction or production of mineral oil is not to be treated as technical services for the purposes of Explanation 2 to section 9 (1) (vii) and would rather be covered by section 44 BB of the Act. 4.7 Thus in our considered opinion Transocean Offshore Deepwater Drilling Inc. being consortium member has rightly offered to tax the receipts u/s 44BB in the return of income.”
And in the case of the assessee the coordinate bench held as under :-
“10. 4656, 3044 /Del/2013 (ASSESSMENT YEAR 2007-08 and 2008-09 & 2009-10) (Revenue’s appeal) Co. no. 60 & 66, 61 & 67/Del/2014 (Asst. Yr. 2007-08 & 2008-09) Both the parties reiterated identical arguments that have been advanced in the case of appeals filed by Transocean Offshore Deepwater Driling Pvt. Ltd. 10.1 Issues raised regarding consortium being an AOP or has been decided in favour of assessee and against revenue hereinabove. Accordingly these appeals by Revenue stands dismissed.”
Respectfully following the decision of the coordinate bench in assessee’s own case both the appeals filed by the assessee are allowed.
Coming to revenue’s appeal in ground No. 1 is covered in favour of the assessee by the aforestated decision of the Tribunal and grievance raised vide ground No. III to VI have been decided in assessee’s own case in earlier assessment order in ITA No. 2072/Del/2016 and the relevant finding reads as under :-
“As relates to Ground No. 3 and 4, we find that now this issue stands covered by the Judgment of the Hon’ble Delhi High Court in the case of DIT vs. Mitchell Drilling International Pvt. Ltd. (supra) wherein the Hon’ble High Court, after analyzing various judgments of Hon’ble Uttarakhand High Court and the judgment in the case of Chowringhee Sales Bureau Ltd. vs. CIT (1973) 87 ITR 542, observed and held as under :- “9. Section 44BB begins with a non obstante clause that excludes the application of Sections 28 to 41 and Sections 43 and 43A to assessments under Section 44 BB. It introduces the concept of presumptive income and states that 10% credit of the amounts paid or payable or deemed to be received by the Assessee on account of “the provision of services and facilities in connection with, or supply of plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils in India” shall be deemed to be the profits and gains of the chargeable to tax. The purpose of this provision is to tax what can be ultimately considered as income of the Assessee earned. From its business and profession.
10. The expression ‘amount paid or payable in Section 44 BB (2) (a) and the expression 'amount received or deemed to be received' in Section 44BB(2)(b) is qualified by the words 'on account of the provision of services and facilities in connection with, or supply of plant and machinery. ’ Therefore, only such amounts which are paid or payable for the sendees provided by the Assesses can form part of the gross receipts for the purposes of computation of the gross income under Section 44 BB (1) read with Section 44BB(2).
It is in this context that the question arises whether the service tax collected by the Assesses and passed on to the Government from the person to whom it has provided the services can legitimately be considered to form part of the gross receipts for the purposes of computation of the Assessee’s 'presumptive income' under Section 44BB of the Act? 12. In Chowringhee Sales Bureau (supra) sales tax in the sum of Rs.32,986 was collected and kept by the Assessee in a separate 'sales tax collection account’. The question considered by the Supreme Court was: 'Whether on the facts and in the circumstances of the case the sum of Rs. 32,986 had been validly excluded from the assessee's business income for the relevant assessment year?". However, there the Assessee did not deposit the amount collected by it as sales tax in the State exchequer since it took the stand that the statutory provision creating that liability upon it was not valid. In the circumstances, the Supreme Court held that the sales tax collected, and not deposited with the treasury, would form part of the Assessee's trading receipt.
The decision in George Oakes (P) Ltd. (supra) was concerned with the constitutional validity of the Madras General Sales (Definition of Turnover and Validation of Assessments)) Act, 1954 on the ground that the word turnover was defined to include sales tax collected by the dealer on interstate sales, Upholding the validity of the said statute the Supreme Court held that "the expression 'turnover' means the aggregate amount for which goods are bought or sold, whether for cash or for deferred payment or other valuable consideration, and when a sale attracts purchase tax and the tax is passed on to the consumer, what the buyer has to pay for the goods includes the tax as well and the aggregate amount so paid would fall within the definition of turnover." Since the tax collected by the selling dealer from the purchaser was part of the price for which the goods were sold, the legislature was not incompetent to enact a statute pursuant to Entry 54 in List II make the tax so paid a part of the turnover of the dealer.
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 BBC (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 BBC (3) brokerage, commission, lid 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 taxable to exports and yet it cannot form part of the 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 1sales tax and excise duty1 like the aforementioned tools like interest, tent etc. 'also do not have any element of 'turn over".
In CIT v. Lakshmi Machine Works (supra), the Supreme Court approved the decision of the Bombay High Court in cn v. Sudarshan Chemicals Industries Ltd. (supra) which in turn considered the decision of the Supreme Court in George Oakes (P) Ltd, (supra). In the considered view of the Court, the decision of the Supreme Court in Lakshmi Machines Works (supra) is sufficient to answer the question framed in the present appeal in favour of the Assessee. The service tax collected by the Assessee does not have any element of income and therefore cannot form part of the gross receipts for the purposes of computing the 'presumptive income’ of the Assessee under Section 44 BB of the Act 16. The Court concurs with the decision of the High Court of Uttarakhand in on v. Schlumberger Asia Services Ltd (supra) which held that the reimbursement received by the Assessee of the customs duty paid on equipment imported by it for rendering services would not form part of the gross receipts for the purposes of Section 44 BB of the Act. 17. The Court accordingly holds that for the purposes of computing the 'presumptive income' of the assessee for the purposes of Section 44 BB of the Act, the service tax collected by the Assessee on the amount paid is for rendering services is not to be included in the gross receipts in terms of Section 44B (2) read with Section 44 BB (1). The service tax is not and amount paid or payable, or received or deemed to be received by the Assessee for the services rendered by it. The only collecting the service tax for passing it on to the Government. 18. The Court further notes that the position has been made explicit by the CBDT itselfin 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 toot. 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 194 J of the Act. ”
Thus, Ground No.l & 2 of the assessee’s appeal/are dismissed and Ground No. 3 & 4 of the assessee’s appeal are allowed
Respectfully following the findings of the coordinate bench we decline to interfere with the findings of the CIT (A), appeal filed by the revenue is dismissed.
In the result, the appeals filed by the assessee are allowed whereas the appeal filed by the revenue is dismissed.