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Director of Income Tax-I, PR. Commissioner of Income Tax Versus Mitchell Drilling International Pvt. Ltd.

Computation of the taxable income under Section 44BB - Whether the amount of service tax collected by the Assessee from its various clients should have been included in gross receipt while computing income? - Held that:- The Court concurs with the decision of the High Court of Uttarakhand in DIT v. Schlumberger Asia Services Ltd (2009 (7) TMI 51 - UTTARAKHAND HIGH COURT) which held that the reimbursement received by the Assessee of the customs duty paid on equipment imported by it for rendering .....

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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 Gove .....

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- Decided in favour of the Assessee. - ITA 403/2013, ITA 384/2015 - Dated:- 28-9-2015 - S. Muralidhar And Vibhu Bakhru, JJ. For the Appellant : Mr Kamal Sawhney, Senior Standing Counsel with Mr Raghvendra Singh, Junior Standing Counsel and Ms Shikha Garg, Advocate. For the Respondent : Mr Piyush Kaushik, Advocate. ORDER S. Muralidhar, J. 1. This Appeal by the Revenue is directed against the order dated 31st August, 2012 passed by the Income Tax Appellate Tribunal ( ITAT ) in Appeal No. 698/DEL/2 .....

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a sum of ₹ 2,09,24,553/- being the service tax received from its customers. 3. The Assessing Officer ( AO ) by order dated 7th February 2011 rejected the contention of the Assessee and included the aforementioned sum collected by the Assessee as service tax in the gross receipts for computing the taxable income under Section 44BB of the Act. 4. The Assessee filed an appeal against the order of the AO, which was allowed by the Commissioner of Income Tax (Appeal) by an order dated 21st Octo .....

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venue that Section 44BB is an instance of taxation of a presumptive income. According to him, the expressions paid or payable to the assessee occurring in Section 44 BB (2) (a) and received or deemed to be received by the Assessee occurring in Section 44 B (2) (b) have to payable to or received by Assessee on account of the service tax on the sum paid or payable for the services provided by the Assessee. He placed considerable reliance on the decisions of the Supreme Court in Chowringhee Sales B .....

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h January 2014 recognize that the gross sums on which tax was to be deducted at source whether Section 194 I or Section 194 J of the Act would not include service tax. He referred to the decision of the Bombay High Court in CIT v. Sudarshan Chemical Industries Ltd. 245 ITR 769 (Bom) where, after considering the decision in George Oakes (P.) Ltd. (supra), it was held that the turn over for the purposes of Section 80HHCof the Act would not include sales tax and excise duty. He also referred to the .....

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HC-DEL-IT. 8. Section 44BB (1) and (2) of the Act read as under: 44BB. (1) Notwithstanding anything to the contrary contained in sections 28 to 41 and sections 43 and 43A, in the case of an assessee, being a non-resident, engaged in the business of providing services or facilities in connection with, or supplying plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils, a sum equal to ten per cent of the aggregate of the amounts specif .....

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ing, namely:- (a) the amount paid or payable (whether in or out of India) to the assessee or to any person on his behalf 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; and (b) the amount received or deemed to be received in India by or on behalf of the assessee on account of the provision of services and facilities in connection .....

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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 legitimately 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 .....

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the Assessee 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 ₹ 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 a .....

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f the Assessee s trading receipt. 13. 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, whe .....

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make the tax so paid a part of the turnover of the dealer. 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 turnov .....

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n 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. Therefor .....

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. (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 o .....

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