TMI Blog2016 (3) TMI 39X X X X Extracts X X X X X X X X Extracts X X X X ..... rected against the final order of assessment for assessment year 2010-11 dated 22/11/2013 passed under section 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 ( in short the Act ) in pursuance of the directions of the Dispute Resolution Panel ( DRP )-1, Mumbai issued on 18/10/2013 u/s. 144C (5) of the Act. Since none appeared for the assessee, this appeal was disposed off with the help of the Ld. Departmental Representative for the Revenue and the material on record. 2. The facts of the case, briefly, are as under:- 2.1 The assessee company, engaged in shipping business, filed its return of income for assessment year 2010-11 on 15/10/2010 declaring total income of ₹ 1,02,53,393/-. The case was taken up for scrutiny and the draft order of assessment was completed u/s. 144C(1) r.w.s. 143(3) of the Act wherein the income of the assessee was determined at ₹ 1,06,42,360/- in view of an addition of ₹ 51,86,212/- in respect of an addition on account of inclusion of service tax collected in the assessee s gross receipts for the purpose of determining the taxable income @ 7.5% u/s. 44B of the Act. Aggrieved, the assessee file its objections thereto before the DRP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon by the Ld. Departmental Representative for the Revenue. 3.3 Ground No.1 (1.1 to 1.4) (supra) are raised by the assessee in respect of the inclusion of service tax in the gross receipts of the assessee for determination of the assessee s taxable income as per the provisions of section 44B of the Act. The assessee company, incorporated in Hong Kong, is engaged in shipping business (i.e. operation of ships in international waters). The assessee had computed its total income @ 7.5% of total collection as per the provisions of Section 44B r.w.s. 172 of the Act. In the course of assessment proceedings, the Assessing Officer found that the assessee has not included the service tax collected by it in the gross receipt for the purpose of computing its income u/s. 44B of the Act. On being queried by the Assessing Officer as to why the service tax of ₹ 51,86,212/- should not be considered as part of gross receipts for the purpose of computation of its income under section 44B of the Act, the assessee submitted that the service tax is collected during the year under consideration but cannot be included in computing its income. The Assessing Officer did not accept the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... age or shipped at port in India and another the amount received or deemed to receive in India in respect of carriage or shipped at any port outside India. It is pertinent to note that section 44B over rides the provisions of section 28 to 43A, however, the other provisions of the Act are applicable apart from the provision of section 44B for computation of income of non-resident engaged in the business of shipping. It is pertinent to note that the sales tax receipt by any assessee is treated as trading or business receipt though the sales tax is collected by the assessee on behalf of the Government as held by Hon ble Supreme Court in the case of Chowringhee Sales Bureau (P) Ltd. (supra) in para 9 asunder: 9. The fact that the appellant credited the amount received as sales-tax under the head sales-tax collection account would not, in our opinion, make any material difference. It is the true nature and the quality of the receipt and not the head under which it is entered in the account books as would prove decisive. If a receipt is a trading receipt, the fact that it is not so shown in the account books of the assessee would not prevent the assessing authority from treating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver and the Hon ble High Court has held that the Excise Duty and sales tax cannot be taken into account into turnover as they do not have any element of profit. This view has been taken by the Hon ble High Court by drawing analogy from the definition of turnover provided u/s 80HHC itself wherein as per the clause (b) of explanation of section 80HHC export turnover is define by excluding freight and insurance charges. Therefore, on the similar analogy the Hon ble High Court has held that the Excise Duty and Sales Tax also have no element of profit similar to that of freight and insurance. However no such exclusion from the aggregate of amounts provided under subsection 2 of section 44B has been permitted while computing the profits and gains of the shipping business in case of non-resident as per section 44B. We quote section 44B as under: Special provision for computing profits and gains of shipping business in the case of non-residents.44B. (1) Notwithstanding anything to the contrary contained in sections 28 to 43A in the case of an assessee, being a non-resident, engaged in the business of operation of ships, a sum equal to seven and a half per cent of the aggregate of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of determining the presumptive profits @ 7.5% of such amount. It is pertinent to note that if the element of profit is the only criteria for inclusion or exclusion of any amount then the demurrage charges or handling charges should not have been included in the aggregate amount for the purpose of determining the presumptive income because the demurrage charges and handling charges also not having any element of profit. Since the service tax Act has been came into force subsequent to the insertion of the explanation therefore, there was no reason/occasion for including the service tax along with the demurrage charges and handling charges in the explanation however when any other amount of similar nature is required to be included then the service tax as far as on the aspect of having no element of profit is similar in nature to that of demurrage charges or handling charges. 11. Further the term turnover is not relevant for estimation of profit and gain u/s 44B and therefore, when the demurrege charges and handling charges are specifically included in the aggregate amount as prescribed under sub-section 2 then whatever amount received or receivable/paid or payable to the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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