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2016 (10) TMI 885 - ITAT MUMBAI

2016 (10) TMI 885 - ITAT MUMBAI - TMI - Inclusion of service tax for the purpose of presumptive income under Section 44B - Held that:- Respectfully following the decision of the Hon'ble Delhi High Court in the case of Mitchell Drilling International Ltd. (2015 (10) TMI 259 - DELHI HIGH COURT ) and of the Coordinate Bench of this Tribunal in the assessee’s own case for assessment years 2007-08, 2008-09 & 2010-11 (supra), we hold that for the purpose of computing the ‘presumptive income’ of the as .....

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le giving effect to this order, after affording the assessee of adequate opportunity of being heard in the matter and to file details/submissions required in this regard. - Uuphold the action of the AO in charging the assessee interest under sections 234C and 234D of the Act. See Commissioner of Income Tax Versus Anjum MH Ghaswala And Others [2001 (10) TMI 4 - SUPREME Court ] - ITA No. 457/Mum/2015 - Dated:- 2-9-2016 - Shri Shailendra Kumar Yadav, Judicial Member and Shri Jason P. Boaz, Acc .....

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e assessee-company, engaged in the business of transportation of cargo and operation of ships in international traffic filed its return of income for A.Y. 2011-12 declaring total income of ₹ 38,75,68,616/-. The case was taken up for scrutiny and the draft assessment order dated 28.02.2014 was served on the assessee. The assessee-company filed its objections thereto before the DRP-II, Mumbai. The DRP-II issued its directions on the assessee s objection under section 144C(5) of the Act vide .....

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nt of INR 1,79,11,894 being 7.5 percent of the service tax collected from customers and paid to Government (i.e. INR 23,88,25,253) for the purpose of computing presumptive income under Section 44B of the Act. 1.2 The Appellant humbly prays that the learned DDIT be directed not to include service tax collected and paid for the purpose of computing the presumptive income under Section 44B of the Act. 2. GROUND 2: Non consideration of correct amount of service tax collected and paid 2.1 Without pre .....

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redit of tax deducted at source amounting to INR 34,583 and short credit for advance tax amounting to INR 10,95,525. 3.2 Application under section 154 of the Act for rectification of the aforesaid mistake apparent from record has been filed, which is pending disposal. 3.3 The Appellant prays that the learned DDIT be directed to give full credit of tax deducted at source and advance tax. 4. GROUND 4: Erroneous levy of interest under Section 234C of the Act 4.1 On the facts and circumstances of th .....

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he learned DDIT be directed to delete the interest levied under Section 234D of the Act. 6. GROUND 6: Initiation of penalty proceeding for the levy of penalty under Section 271(1)(c) 6.1 On the facts and circumstances of the case and in law, the learned DDIT erred in initiating penalty proceeding under section 271(1)(c) of the Act. 6.2 It is prayed that the learned DDIT be directed to drop the penalty proceeding under section 271(1)(c) of the Act. 4. Ground No. 1 (1.1 & 1.2) - Inclusion of s .....

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in favour of the assessee by the decisions of Coordinate Bench of this Tribunal in assessee s own case for assessment years 2007-08 and 2008-09 in (2013) 60 SOT 86 (Mum Trib) and for A.Y. 2010-11 in ITA No.7494/Mum/2013 & 524/Mum/2014 dated 31.07.2015. It was prayed that in view of the above, the assessee s appeal on this issue be allowed. 4.2 Per contra, the learned D.R. for Revenue supported the orders of the authorities below which had placed reliance on the decision of the Coordinate Be .....

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wn case for assessment years 2007-08, 2008-09 and 2010-11 (supra), which has considered the decision cited by the learned D.R., the Hon'ble Delhi High Court in the case of DIT-I vs. Mitchell Drilling International (P) Ltd. (2015) 62 taxmann.com 24 (Delhi) dated 28.09.2015 has held this very same issue in favour of the assessee. 4.4.1 We have heard the rival contentions of both the parties and perused and carefully considered the material on record; including the judicial pronouncements cited .....

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ssee s own case for assessment years 2007-08, 2008- 09 (2013) 35 taxmann.com 342 (Mumbai Trib) and for A.Y. 2010-11 in ITA Nos. 7498/Mum/2013 & 524/Mum/2014 dated 31.07.2015. In the order for A.Y. 2010-11, the Coordinate Bench, after considering the decision in the case of China Shipping Container Lines (Hong Kong) Co. Ltd. (supra), held as under at paras 3 to 5 thereof: - 3. At the outset, the ld. Counsel for the assessee submitted that this issue is covered in favour of the assessee by the .....

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de this issue against the assessee. 4. After considering the rival contentions and on perusal of the impugned orders, we find that the main issue which has been challenged is, whether the service tax is to be treated as part of the total receipts for the purpose of computing the Presumptive income u/s 44B. The assessee s case had been that service tax collected does not form total of the part receipts as it does not involve any element of profit, because it has been collected from the customers .....

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the issue. It is observed that the Assessing Office in his impugned orders and Ld. DR at the time of hearing before us have heavily relied on the decision of Hon'ble Uttarakhand High Court in the cases of Halliburton Offshore Services Inc. (supra), Sedco Forex International Inc. (supra) and Trans Ocean Offshore Inc. (supra) in support of the Revenue's that the amount of service tax collected by the Assessee should be included in the gross receipts for the purpose of computing the total i .....

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that in none of these cases the issue of reimbursement of the custom duty was involved, the nature of which was statutory payment. Their Lordship held that reimbursement towards the custom duty paid by the Assessee being statutory in nature could not form part of the gross receipts for the purpose of computing the deemed profit under section 44BB. 7. The Ld. DR has also relied on the decision of Delhi Bench of ITAT in the case of Deputy Director of Income Tax Vs. Technip Offshore Contracting B. .....

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relied upon by the Rely in support of its case on the similar issue Case of Islamic Republic of Iran Shipping Lines (supra) before Mumbai Bench of ITAT and relying on the decision of the Hon'ble Bombay High Court in the case Sudarshan Chemical Industries 242 ITR 769 and that of Hon'ble Uttarakhand High Court in the case of DT Vs. Schlumberger ASIA Service Ltd. (supra) it was held by the Mumbai benches that the service tax, which is a statutory liability, would not involve any element of .....

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ein Delhi bench of the ITAT has decided a similar issue in favour of the assessee holding that reimbursement of service tax, being a statutory liability, would not involve any element of profit and the same therefore could not be included in total receipts for determining presumptive income under Section 44BB. 8. Keeping in view all the judicial pronouncement discussed above, we are of the view that the preponderance of judicial opinion is in favour of the Assessee on the issue and keeping in vi .....

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s, one view has been taken therefore, consistent with the same precedence, we also hold that the amount of service tax cannot be included in the gross receipts for the purpose of computing the Presumptive income of the assessee u/s 44B. Accordingly, ground no. 1 raised by the assessee is allowed. 4.4.2 We have respectfully perused the decision of the Hon'ble Delhi High Court in the case of Director of Income Tax-I vs. Mitchell Drilling International (P) Ltd. (2015) 62 taxmann.com 24 (Delhi) .....

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erefore cannot form part of the gross receipts for the purposes of computing the presumptive income of the assessee under section 44B of the Act. At para 17 of the order it was observed that service tax is not an amount paid or payable or received or deemed to be received by the assessee for services rendered by it. The assessee is only collecting the service tax for passing it on to the government. Their Lordships at para 19 of their order held that for the purpose of computing the presumptive .....

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presumptive income of the assessee under section 44BB of the Act, since service tax collected by the assessee does not have any element of income, it therefore cannot form part of the gross receipts and consequently delete the addition made in this regard by the authorities below. Accordingly, ground 1 (1.1 & 1.2) of the assessee s appeal is allowed. 5. Ground No. 2 (2.1) has been raised by the assessee as an alternative ground without prejudice to what has been raised in ground No. 1 (supra .....

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