2025 (3) TMI 1266 - AT - Income Tax

Computation of presumptive income u/s 44BB - Goods and Services Tax (GST) inclusion in the computation of presumptive income u/s 44BB - HELD THAT - As relying on Orient Overseas Container Line Limited 2024 (11) TMI 954 - ITAT MUMBAI the Coordinate Bench in Seadrill International Ltd 2025 (1) TMI 1531 - ITAT MUMBAI has held that the GST which is collected as a separate line item in the invoices as a statutory levy cannot be included as part of gross receipts for the purposes of section 44BB of the Act. Thus GST would not form part of gross receipts for the purposes of computing income under Section 44BB of the Act and the AO is hereby directed to exclude the amount towards GST while computing gross receipts in hands of the assessee. In the result ground no. 2 of the assessee s appeal is allowed.

1. ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment are:

Whether the final assessment order dated October 25, 2023, is barred by limitation under Section 153 of the Income Tax Act, 1961.
Whether Goods and Services Tax (GST) should be included in the computation of presumptive income under Section 44BB of the Income Tax Act, 1961.
The appropriateness of levying interest under Sections 234A, 234B, and 234C of the Income Tax Act, 1961.
The initiation of penalty proceedings under Section 274 read with Section 270A for underreporting of income.

2. ISSUE-WISE DETAILED ANALYSIS

Final Assessment Order Barred by Limitation

Relevant Legal Framework and Precedents: Section 153 of the Income Tax Act prescribes the time limit for completing assessments. The appellant contended that the order was time-barred as it was issued beyond the prescribed 12-month period from the end of the relevant assessment year.
Court's Interpretation and Reasoning: The Tribunal did not delve into the merits of this issue as it became infructuous due to the decision on the substantive issue regarding GST inclusion.

Inclusion of GST in Computation of Presumptive Income under Section 44BB

Relevant Legal Framework and Precedents: Section 44BB provides for presumptive taxation of non-resident companies involved in oil and gas exploration. The appellant argued against the inclusion of GST in gross receipts, citing precedents from various courts, including the Uttarakhand High Court and ITAT's own decisions in similar cases.
Court's Interpretation and Reasoning: The Tribunal examined past rulings, including the decision in Orient Overseas Container Line Limited, which excluded statutory levies like GST from gross receipts for presumptive taxation. The Tribunal emphasized that GST is a statutory levy collected on behalf of the government and does not constitute income.
Key Evidence and Findings: The Tribunal noted that GST was shown as a separate line item in invoices, reinforcing its nature as a statutory levy rather than income.
Application of Law to Facts: The Tribunal applied the reasoning from previous judgments, concluding that GST should not be included in the computation of income under Section 44BB.
Treatment of Competing Arguments: The Tribunal rejected the Revenue's reliance on Section 145A amendments, which were deemed inapplicable to the presumptive taxation scheme under Section 44BB.
Conclusions: The Tribunal directed the exclusion of GST from gross receipts for the purpose of calculating presumptive income under Section 44BB.

Levy of Interest under Sections 234A, 234B, and 234C

Relevant Legal Framework and Precedents: These sections pertain to interest levied for delays in filing returns, payment of advance tax, and shortfall in advance tax payments.
Court's Interpretation and Reasoning: The Tribunal deemed the issue consequential, dependent on the outcome of the substantive GST inclusion issue.

Initiating Penalty under Section 274 r.w.s. 270A

Relevant Legal Framework and Precedents: Section 270A deals with penalties for underreporting income.
Court's Interpretation and Reasoning: The Tribunal did not find it necessary to adjudicate on this issue, given the decision on the GST matter.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: "GST is a statutory levy collected separately as part of the invoice and therefore cannot be included for purpose of taxation while computing the presumptive income."
Core Principles Established: The Tribunal reaffirmed that statutory levies like GST, collected on behalf of the government, do not form part of the gross receipts for presumptive taxation under Section 44BB.
Final Determinations on Each Issue: The appeal was allowed, with GST excluded from gross receipts for income computation under Section 44BB, rendering the limitation and penalty issues moot.