TMI Blog2013 (10) TMI 743X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, the amount received on account of service tax as part of the price of carriage/shipped service is very much a trading/business receipt and would be part of the aggregate amount for presumptive profit and gain to be determined u/s 44B - Service tax collected by the assessee would form part and partial of the aggregate amount as specified under sub-section 2 of section 44B for the purpose of determining the profit and gain under this section – Decided against the Assessee. Interest u/s 234B of the Income Tax Act – Held that:- This issue is covered by the decision of Hon'ble Jurisdiction High Court in case of DIT (International Taxation) v. NGC Network Asia LLC [2009 (1) TMI 174 - BOMBAY HIGH COURT] in which the Hon'ble High Court has held that when a duty is cast on the payer to deduct tax at source then on failure of the payer to do so, no interest can be charges from the payee u/s 234 – Decided in favor of Assessee. - IT Appeal No. 8516 (Mum.) of 2010 - - - Dated:- 23-8-2013 - B. RAMAKOTAIAH AND VIJAY PAL RAO, JJ. For the Appellant : Jiger Saiya. For the Respondent : Narender Kumar. ORDER:- PER : Vijay Pal Rao This appeal by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come u/s 44B of the Act. Accordingly, the AO asked the assessee to show-cause as to why the service tax collected by the assessee should not be considered as part of gross receipts for the purpose of computation of income u/s 44B of the Income Tax Act. In response the assessee submitted that the service tax amounting to Rs. 2,72,30,136/- has been collected during the relevant assessment year but the same cannot be included in the presumptive income. The AO did not accept the contention of the assessee and included the service tax amount of Rs. 2,72,30,136/- collected by the assessee in the gross receipt of the assessee for the purpose of taxation as per the provisions of section 44B. The AO issued a draft assessment order dated 13.12.2009 against which the assessee filed objection before Dispute Resolution Panel (DRP). The DRP has confirmed the inclusion of service tax collected by the assessee in the amount of gross receipt for determination of the taxable income as per the provisions of section 44B. Consequently the AO has framed the assessment order dated 20.10.2010 in pursuant to the DRP direction and included the service tax collected by the assessee in the gross receipts for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 therefore, the said decision of the Tribunal has to be followed. He has also relied upon the decision of this Tribunal in case of Orient Overseas Container Line Ltd. v. Addl. DIT (International Taxation) n ITA No. 7809/M/2010 vide order dated 17.5.2013 and submitted that the decision in case of Islamic Republic of Iran Shipping Lines (supra) has been followed in this case. 5. On the other hand, the Ld. DR has submitted that section 44B of the Act is special provision and any deduction u/s 28 to 43A would not be considered for the purpose of determination of income u/s 44B. He has further contended that under the provisions of section 44B what is to be considered is the amount received or payable to the assessee and not the net income. The Ld. DR has forcefully contended that the amount received includes all the amounts received or receivable by the assessee including the service tax. The service tax is an integral part of receipts and cannot be treated as separate receipts as it is included in the invoices. He has relied upon the decision of Delhi Benches of Tribunal in case of Dy. CIT (International Taxation) v. Technip Offshore Contracting B.V. [2009] 29 SOT 33, and submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ended that apart form the consideration against the carriage of passengers, livestock, goods etc what can be included is only the demurrage charges or handling charges as per the explanation to section 44B and service tax is neither in the nature of demurrage charges nor handling charges or any amount similar nature cannot be included in the gross receipts for the purpose of taxation as under the provisions of section 44B. 8. We have considered the rival submissions and carefully gone through the relevant material on record as well as the various decisions relied upon by either of the parties. With a view to simplify and rationalise the assessment and computation of profit and gain of shipping business in the case of non-resident the Finance Act 1975 has made special provision in section 44B of the Income Tax Act. Under this provision, profits and gain of non-resident from the business of operation of ships will not be calculated in accordance with the provisions of section 28 to 43A of the Income Tax Act but the same will be taken as 7.5% of the aggregate of the amounts paid or payable to the assessee or to any persons on his behalf on account of carriage of passengers, livestoc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of Hon'ble Supreme Court that this issue of the amount received as Sales Tax is treated as trading receipt of the assessee is settled. A similar view has been taken by the Hon'ble Supreme Court in case of T. Naggi Reddy (supra) as well as in case of McDowell Co. Ltd. (supra). The assessee has heavily relied upon the decision of this Tribunal in case of Islamic Republic of Iran Shipping Lines (supra) wherein this Tribunal has relied upon the decision of Hon'ble High Court in case of Sudarshan Chemicals Industries Ltd. (supra) and held that service tax is statutory liability and would not involved any element of profit and accordingly the same cannot be included in the total receipt for determining the presumptive income. On the other hand, the Ld. DR has relied upon the decision of this Tribunal in case of Technip off Shore Contracting B.V. (Supra) wherein the Tribunal has relied upon the decision of Hon'ble Uttarakhand High Court in case of Sedco Forex International Inc. (supra) and held that service tax collected by the assessee in connection with the services specified u/s 44BB of the Act will be included in the total receipt for the purpose of determining the presumptive pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India. Explanation For the purposes of this sub-section, the amount referred to in clause (i) or clause (ii) shall include the amount paid or payable or received or deemed to be received, as the case may be, by way of demurrage charges or handling charges or any other amount of similar nature." 10. As we have already mentioned that the provisions of section 44B has been brought into statute to simplify the determination of taxable income of the non-resident who are in the business of shipping. The presumptive profits and gain of such business chargeable to tax under the provisions of section 44B are determined as a sum equal to 7.5% of the aggregate amounts paid or payable to the assessee on account of carriage of passengers etc. or goods shipped at any port in India as well as amount received or deemed to be received in India on account of carriage of passengers or goods shipped at any port outside India. There is no dispute that the service tax received/collected by the assessee is in respect of the services provided on account of carriage of passengers or goods shipped either any port in India or any port outside India. Therefore, the said amount of service tax is a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mercial practice, levy of tax on sale of goods or service is reflected in the bills either as merged in the price or being shown separately. Therefore, the amount received on account of service tax as part of the price of carriage/shipped service is very much a trading/business receipt and would be part of the aggregate amount for presumptive profit and gain to be determined u/s 44B. 12. In view of the above discussion we hold that the service tax collected by the assessee would form part and partial of the aggregate amount as specified under sub-section 2 of section 44B for the purpose of determining the profit and gain under this section. Accordingly, we upheld the orders of the authorities below qua this issue. 13. Ground No. 2 in view of our finding regarding Ground No. 1 and further when the profit and gain are estimated without having regard to the any element of profit in the receipts we do not find any merit in the Ground No. 2. 14. Ground No. 3 regarding levy of interest u/s 234B. We have considered the rival submissions and relevant material on record. This issue is covered by the decision of Hon'ble Jurisdiction High Court in case of DIT (International Taxation) v. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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