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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
Before: SHRI SHAILENDRA KUMAR YADAV, JM & SHRI RAMIT KOCHAR, AM
आदेश / O R D E R
PER SHAILENDRA KUMAR YADAV, JM These are cross appeals by assessee and Revenue arising out of the order of DRP-II.
The issue in assessee’s appeal is with regard to inclusion of service tax in computation of presumptive income under section 44BB of the I.T. Act, 1961. In this regard the learned D.R. drew out attention to the order of Hon'ble Delhi High Court in the case of Director of Income Tax vs. Mitchell Drilling International P. Ltd in ITA 403/2013 wherein the court has 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’’.
In CIT v. Lakshmi Machine Works (supra), the Supreme Court approved the decision of the Bombay High Court in CIT 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.
The Court concurs with the decision of the High Court of Uttarakhand in DIT 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.
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 t it for rendering services is not to be included in the gross receipts in terms of Section 44 BB (2) read with Section 44 BB (1). The service tax is not an amount paid or payable, or received or deemed to be received by the Assessee for the services rendered by it. The Assessee is only collecting the service tax for passing it on to the government.
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-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.
The question framed, is therefore, answered in the negative i.e. favour of the Assessee and against the Revenue.” 2.1 Nothing contrary was brought to our knowledge. Facts being similar, so following the same reasoning we hold that the service tax would not form part of gross receipt for the purpose of income computation under section 44BB of the Act.
Next issue is with regard to levy of interest under section 234A of the Act, which is consequential to the earlier issue.
In the result, Appeal filed by the assessee is allowed as indicated above.
Revenue has filed the following grounds in its appeal: -
“1. Whether on the facts and under the circumstances of the case, the Hon'ble DRP was correct in holding that interest u/s 234B is not leviable in the case of non-resident despite a specific finding by the Hon'ble Delhi High Court in the case of DIT Vs. Alcatel Lucent USA Inc dated 14.11.2013 in and 329/2012 wherein it has been specifically stated that a non-resident assessee which does not admit income chargeable to tax must be inferred to have induced the Indian payer not to deduct TDS, thus, rendering itself liable for advance tax interest.”
Revenue has raised the issue of interest under section 234B of the Act. Assessing Officer held that interest under section 234B is leviable in case of assessee is non-resident. In appeal DRP-II granted relief to the assessee by following the decision of the Hon'ble Bombay High Court in the case of NGC Network Asia LLC (313 ITR 187) wherein it has been held that interest under section 234B and 234C is not leviable in the facts of the case. Nothing contrary was brought to our knowledge, so following the same we are not inclined to interfere in the findings of DRP-II , Mumbai who has correctly held that interest under section 234B is not allowable in the case of non- resident. Same is upheld.
In the result, appeal of assessee is allowed and appeal of Revenue is dismissed. प�रणामतः िनधा�रती क� अपील �वीकृत �वीकृत क� जाती है । राज�व क� अपील खा�रज क� जाती है । Order pronounced in the open court on 6th November, 2015. आदेश क� घोषणा खुले �यायालय म� �दनांकः 06.11.2015 को क� गई । Sd/- Sd/- (RAMIT KOCHAR) (SHAILENDRA KUMAR YADAV) लेखा सद�य/ACCOUNTANT MEMBER �याियक सद�य/JUDICIAL MEMBER मुंबई Mumbai, �दनांक Dated 6th November, 2015
आदेश क� �ितिलिप अ�ेिषत/Copy of the Order forwarded to :