9911796707
TMI Blog2011 (4) TMI 637X X X X Extracts X X X X X X X X Extracts X X X X ..... ternational Taxation) -3(1), Mumbai has erred in including the amount of service tax collected in computing the income by including the service tax collected in the gross receipts of the Appellant for the relevant year under consideration for determining the taxable income of the appellant. 2. Ground Nos.1 & 2: After hearing both the parties, we find that assessee filed a return declaring an income of Rs. 7,16,28,050 at the rate of 7½ per cent profit of total collection of Rs. 95,50,40,194 as per the provisions of section 44B r.w. section 172 of the I. T. Act. The Assessing Officer observed that since the provisions of section 44B are applicable in the case of the assessee who was engaged in the operations of ships, therefore, assessee was required to substantiate its claim that it was engaged in the business of operation of ships by filing the copies of ship register certificates in respect of ships owned/chartered by the assessee and employed in the international traffic. In response, assessee filed the copy of two ships register stating that these certificates for two owned vessels. However, on pursuance of the certificates it was noted by the Assessing Officer that they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... matter went to DRP and assessee objected to the draft order. The learned DRP decided the issue vide para-3 which is as under: "3. Directions: A. Objection No. 1 1. The assessee has objected to denying the assessment of shipping business income under section 44B/172 of the Income-tax Act, 1961 and wrongly applying rule 10D of the Income-tax Rules, 1962. While rejecting the application under section 44B, the AO has given detailed reasoning in his assessment order, according to which, the assessee failed to file all the relevant documents relating to ownership of the vessels, evidence of movement of vessels and various other documents relating to the vessels. Before the DRP, the assessee contended that ship registry for one vessel was filed and other bare boat charter certificates for four vessels were also filed, the details of income from shipping on account of slot charges was also filed. The AO has applied an estimated net profit of 10 per cent on the total receipts by invoking rule 10. The assessee has also objected to estimation of 10 per cent invoking rule 10. The assessee has also objected to estimation of 10 per cent profit against 7.5 per cent mentioned in s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of freight receipts. He wondered if estimation was on freight receipts, then freight had to be generated only from operations of ships otherwise it cannot be termed as freight and then in that case how he could reach the assumption that assessee was not running the ships. Once the Parliament has provided a specific method for taxation, then the Assessing Officer could not have ignored the same by invoking rule 10. He pointed out that in the immediate previous year assessee's income was accepted as income from shipping business under section 44B in the assessment order passed under section 143[3] and even in later year in the order passed under section 143[1] the income has been accepted as income from shipping under section 44B. Therefore, in this year there was no material before the Assessing Officer to pass a contrary order. He also pointed out the Assessing Officer has mentioned about the documents like certificates issued by the port authorities in respect of birthing of vessels, but no such certificates are ever issued by the port authorities. While concluding his arguments, he submitted that in view of the above detailed arguments, the matter may be restored to the DRP for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re coming to a conclusion. 8. Ground No. 3: After hearing both the parties, we find that during assessment proceedings Assessing Officer noted that assessee had also received a sum of Rs. 3,12,20,008 as service tax and he proposed to include the same in the gross receipts for arriving at the profit rate of 10 per cent. It was argued that the same could not be included in the gross receipts for arriving at a particular presumptive income and in this regard various case laws were cited. The Assessing Officer did not find force in the submissions and simply observed that these judgments pertained to the issue of customs duty. Ultimately, be included the sum of Rs. 3,12,20,008 in the gross receipts and applied the rate of 10 per cent as income. 9. On appeal, the Ld. DRP confirmed the order of the Assessing Officer by relying on the decision of the Delhi Bench of the Tribunal in the case of Dy. DIT [I.T.] v. Technip Offshore Contracting BV [2009] 29 SOT 33. 10. Before us, Ld. counsel of the assessee submitted that service tax was a statutory levy and assessee perhaps cannot make any profit on this amount as assessee is collecting the same on behalf of the Government of India and is d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ince no excise duty and sales tax were leviable in respect of exports, therefore, while calculating the deduction under section 80HHC by the formula - Profits of business xExport turnover Total turnover it would not be proper to include the sales tax and excise duty in the total turnover, because there cannot be any element of profit in sales tax and excise duty. In our view, this principle is equally applicable to the service tax also. Again the Hon'ble Uttarakhand High Court in the case of Schlumberger Asia Services Ltd. (supra), wherein the question was whether the amount of customs duty paid was includible in the total turnover for computing profits under section 44BB. The Hon'ble High Court has observed at placitum-8 as under: "Having considered the submissions of the learned counsel for the parties, we are of the view that reimbursement towards the customs duty, paid by the assessee, being statutory in nature, cannot form part of amount for the purposes of deemed profits ..... X X X X Extracts X X X X X X X X Extracts X X X X
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