TMI Blog2021 (12) TMI 930X X X X Extracts X X X X X X X X Extracts X X X X ..... every amount paid on account of provision of services and facilities which must be deemed to be the income of the assessee u/s 44BB . It is only such amounts, which are paid to the assessee on account of the services and facilities provided by them, in the prospecting for or extraction or production of mineral oils, which alone must be deemed to be the income of the assessee. Respectfully following the ratio of the judgment as laid down by the Hon'ble Delhi High Court and Hon ble Uttarakhand High Court M/s Schlumberger Asia Services Ltd. [ 2019 (4) TMI 1177 - UTTARAKHAND HIGH COURT] we hold that the service tax receipts do not form part of receipts for computation of income in the section 44BB of the Income Tax Act. - Decided against revenue. - ITA No. 4914/Del/2018 - - - Dated:- 29-11-2021 - Sh. Amit Shukla, Judicial Member And Dr. B. R. R. Kumar, Accountant Member For the Revenue : Sh. T.S.Mapwal, Sr. DR For the Assessee : Sh. Amit Arora, Adv. ORDER PER DR. B.R.R.KUMAR, AM This appeal has been fi led by the revenue against the order of the ld. CIT(A)-2, Noida dated 25.04.2018. 2. The only issue involved in this case is that whether servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rofit, the quantum of amount received from the customers against its service tax obligation had to be essentially considered as part of the receipt and, accordingly, a sum of Rs. ***** was added back for the purpose of calculating the gross receipts on which the presumptive tax rate had to be applied. 5. The Ld. DR submitted that Section 44BB makes a special provision for computing profits and gains of the non-resident assessee engaged in the business of exploration, etc., of mineral oils. Subsection (1) provides that in respect of such an assessee, notwithstanding anything contained in sections 28 to 41 and sections 43 to 43A, an assessee shall be deemed to have earned ten per cent profit on the amount mentioned in sub-section (2) received by him. It was submitted by the Ld. DR that Section 44BB is a complete code in itself. It provides by a legal fiction to be the profits and gains of the non-resident assessee engaged in the business of oil exploration at the rate of 10 per cent of the aggregate amount specified in subsection (2). He submitted that the Hon'ble Uttrakhand HC has consistently held in a number of cases that the aggregate amount received be included in total i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [1982] 9 Taxman 173 (Punj_Har) Kunjpura Kiln Royalty (payable to government) [2006] 154 Taxman 274 (Allahabad) Rampur Distillery Export Duty [2015] 58 taxmann.com 206 (Bombay) Ovira Logistics Service Tax. 8. The Ld. DR submitted that in view of the above mentioned case laws, the receipt of service tax from ONGC is definitely connected with the business of exploration and / or extraction of oil and needs to be included in the aggregate amount to be brought to tax under section 44BB. He further submitted that it is not precise to categorize service tax receipt merely as a statutory liability. It is also to be categorised as contractual liability whereby the 'service receiver' agrees to bear this expense and accordingly pays the 'service provider' (assessee). It was submitted that it is the practice in the oil and gas industry to contractually bind the 'service receiver' to bear this expense. Thus, it is a matter of contract (implicit or explicit) between the parties because it is improbable / impossible that 'service receiver' will agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 outside India. 9. Section 44BB begins with a non obstante clause that excludes the application of Sections 28 to 41 and Sections 43 and 43A to assessments under Section 44 BB. It introduces the concept of presumptive income and states that 10% credit of the amounts paid or payable or deemed to be received by the Assessee 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 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 to be re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... price for which the goods were sold, the legislature was not incompetent to enact a statute pursuant to Entry 54 in List II 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 turnover was also in another specific context. There the question before the Supreme Court was whether excise duty and sales tax were includible in the total turnover which was the denominator in the formula contained in Section 80 HHC (3) as it stood in the material time? The Supreme Court considered its earlier decision in Chowringhee Sales Bureau (supra) and answered the question in the negative. The Supreme Court noted that for the purposes of computing the total turnover for the purpose of Section 80 HHC (3) brokerage, commission, interest etc. did ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DT 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 Government for collection of Service Tax. Therefore, it has been decided that tax deduction at source) under sections 194-I of Income Tax Act would be required to be made on the amount of rent paid/payable without including the service tax. In Circular No. 1/2014 dated 13th January 2014, it has been clarified that service tax is not to be included in the fees for professional services or technical services and no TDS is required to be made on the service tax component under Section 194J of the Act. 19. The question framed, is therefore, answered in the negative i.e. favour of the Assessee and against the Revenue. 20. Further Hon ble High Court of Uttarakhand in the case of DIT International Taxation Vs M/s Schlumberger Asia Services Ltd. in ITA No. 40 of 2012 vide order dated 12.04.2019 held that the amount reimbursed to the assessee (service provider) by the ONGC (service recipient), representing the service tax paid earlier by th ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
