9911796707
TMI Blog2025 (5) TMI 1067X X X X Extracts X X X X X X X X Extracts X X X X ..... he following amongst other grounds. Each of the following grounds of appeal is without prejudice to the other. 1. Final Assessment order barred by limitation. a. The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject, the impugned Order dated 11 December 2024 passed under section 143(3) r.w.s. 144C(13) of the Act is ab-Initio void being barred by limitation and hence, ought to be struck down. b. The Id. AO erred in not appreciating that timelines for passing final assessment order as per section 153 of the Act being 12 months from the end of relevant AY 2022-23 was 31 March 2024. Accordingly, the final order passed under section 143(3) r.w.s. 144C(13) of the Act on 11 December 2024 is time barred. c. The Id. AO erred in ignoring the decision of Madras High Court in the case of Roca Bathroom Products (P.) Ltd (2022) 140 taxmann.com 304/445 ITR 537. 2. Inclusion of Goods & Service tax (GST) in the computation of presumptive income under section 448B of the Act a. The Id. AO erred in holding that GST would form part of the gross receipts for the purposes of income computation under section 44BB(1) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O erred has erred in granting credit of TDS of Rs. 2,95,96,336/- instead of Rs. 3,35,99,459/- as claimed in the return of income. Accordingly, there is short credit to the extent of Rs. 40,03,123/- 5. Levy of interest under section 234B,234C & 234D of the Act The Id.AO erred in levying consequential interest payable under the act totalling to Rs. 21,13,005/- 6. Initiating penalty under section 274 r.w.s. 270A of the Act for under reporting of income The Id.AO erred in ignoring submissions that receipts on account of goods and service tax do not form part of gross receipts for the purpose of calculating presumptive income under section 44BB of the Act and proceeded to form a believe that income is under-reporting of income." 2. The rival submissions of both the parties have heard and record perused. The Learned Authorized Representative (ld. AR) of the assessee submits that the assessee has raised multiple grounds of appeal, however, the main ground of appeal relates to treating the amount of Good and Services Tax (GST) as a part of total turnover. The ld. AR of the assessee submits that the ld. DRP while confirming the addition in the draft assessment order followed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er and the relevant findings therein read as under: "8. We have heard both the parties at length, perused the relevant materials referred to before us. The controversy before is whether GST is to be included while computing the deemed profit u/s 44B. Section 44B is a special provision for computing profits and gains of shipping business in the case of non-residents. Prior to insertion of Section 44B, taxable profits of foreign shipping enterprises were determined by suitably apportioning their global profits between their Indian business and foreign business or on the basis of "voyage accounts" which led to difficult and complicated issues in assessments. With a view to simplifying and rationalizing the assessments in such cases, Section 44B was inserted for computing profits and gains of shipping business in the case of non- residents at 7.5% of specified amounts. Insertion of Section 44B substituted computation as per normal provisions in which both debit of expenses and credit of income were considered. At this point, it will be relevant to incorporate the relevant provision of Section 44B of the Act. 1) Notwithstanding anything to the contrary contained in sections 28 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son on his behalf on account of carriage of passengers, livestock, mail or goods shipped at any port 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 carriage of passengers, livestock, mail or goods shipped at any port outside India. 38. .... 39. Section 172 makes a special provision for the levy and recovery of tax in the case of any ship, belonging. to or chartered by a non-resident which carries passengers, livestock, mail or goods shipped at a port in India. Under this provision an ad hoc assessment is made before the ship is allowed to leave the Indian port unless the nonresident shipping concern has an agent in India from whom the tax would be recoverable. For this purpose, onesixth of the amount paid or payable for the carriage of passengers, livestock, mail or goods shipped at an Indian port is regarded as taxable income which is subjected to tax at the rate applicable in the case of foreign companies. The assessee has, however, the option to file subsequently a return of income and ask for a regular assessment to be made if his actual income is less than the above-mentioned amount of one-sixth of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly paid or incurred by the assessee to bring the goods or services to the place of its location and condition as on the date of valuation; (iii).. (iv)... ... Explanation 1. - for the purposes of this section, any tax, duty, cess or fee (by whatever name called) under any law for the time being in force, shall include all such payment notwithstanding any righty arising as a consequence to such payment. 11. CBDT Circular No. 8 dated 26/12/2018 had explained amendment in the following manner:- "Amendments in relation to notified Income Computation and Disclosure Standards 39.1 Section 145 of the Income-tax Act empowers the Central government to notify Income Computation and Disclosure Standards (ICDS). In pursuance to the above, the Central Government has notified ten such Standards effective from 1st April, 2017 relating to Assessment Year 2017-18 These are applicable to all assesses (other than an individual or a Hindu undivided family who are not subject to tax audit under section 44AB of the Income-tax Act) for the purposes of computation of income chargeable to income-tax under the head "Profits and gains of business or profession" or "Income from other sources" 39.2 In o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tory shall be made in accordance with the method of accounting regularly employed by the assessee and such valuation shall be further adjusted to include the amount of any tars, duty, cess or fee (by whatever name called, actually paid or incurred by the assessee to bring the goods to the place of its location and condition as on the date of valuation 52.3 This amendment will take effect from 1st April, 1999 and will, accordingly, apply in relation to the assessment year 1999- 2000 and subsequent years." 13. Now by the Finance Act 2018, Section 145 of the amendment was given to ICDS and Section 145(2) empowered the Central Government to notify ICDS by this amendment, "services" were also brought into the scope of Section 145A. Now as per Section 145A(ii), the valuation of purchase and sale of goods or services and of inventory shall be adjusted to include the amount of any tax, duty, cess or fee (by whatever name called) actually paid or incurred by the assessee to bring the goods or services to the place of its location and condition as on the date of valuation. Thus, Section 145A(ii) suggests inclusive method of accounting for computing 'profits and gains of business or pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... placement of consideration with 'fair market value' where the amount of consideration is less than the fair market value determined in a prescribed manner. 16. Thus, in our view adding GST component to the deemed income which has to be computed directly on specified amounts i.e. amount paid or payable on account of carriage of goods shipped which is revenue element only. For the earlier regime of service tax prior to GST, there were various judicial precedents which upheld exclusion of service tax while computing the provision u/s.44B or other similar provisions. For instance, following judgments have been brought to our notice before us wherein the Hon'ble Courts has approved the exclusion of service tax. i.M/s Deepwater Pacific I Inc SLP (Civil) Dairy No(s). 47374/2023) ii.Vantage International Management Co. [2023] 156 taxmann.com 23 iii.Transocean Offshore International Ventures Lad. [2023] 157 tasumann.com 203 (SC) iv.Schlumberger Asia Services Ltd. [2024] 158 taxfmann.com 267 (SC) Further, Hon'ble Bombay High Court in the case of Pr. CIT(IT) v. Boskalis International Dredging International CV (Income Tax Appeal No. 55 OF 2017 dated 25 March 2019) (followed the decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. Full Bench of Hon'ble High Court of Uttarakhand in case of DIT v. Schlumberger Asia Services Ltd. [2019] 414 ITR 1 (Uttarakhand) (FB) held that service tax paid earlier by the assessee to Government of India is not on account of provision of services in connection with exploration and production of mineral oil, hence would not form part of aggregate taxable amount referred to in clauses (a) and (b) of sub-section(2) of section 44BB Relevant extract of the ruling is as under:- "27. The word 'on account of has been defined in the Random House Dictionary of the English Language to mean "by reason of; because of, for the sake of. In the Reader's Digest Great Encyclopaedic Dictionary, "On account of is defined to mean on consideration of, because of. In Collins English Dictionary "On account of" is defined to mean as 'because of, by reason of. D. Ramanatha Aiyer: The Law Lexicon defines "on account of to mean "because of, by reason of, towards payment of (1) concerning (2) because of". It is only if the service tax reimbursed to them by the ONGC, which was paid by the assessee to the Government earlier, is held to be a payment in consideration of the services and fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rate specified in section 66B of Finance Act 2012 in such manner, and within such period, as may be prescribed. Notwithstanding anything contained in sub-section (1), in respect of such taxable services as may be notified by the Central Government in Official Gazette, service tax the the thereon shall be paid by such person and in such manner as may be prescribed at the rate specified in section [66B] and all the provisions of this Chapter shall apply to such person as if he is the person liable for paying the service tax in relation to such service Provided that the Central Government may notify the service and the extent of service tax which shall be payable by such person and the CGST Act, 2017 (1) Every deposit made towards tax, interest, penalty, fee or any other amount by a person by internet banking or by using credit or debit cards or NEFT or RTGS or by such other mode and subject to such conditions and restrictions as may be prescribed, shall be credited to the electronic cash ledger of such person to be maintained in such manner as may be prescribed. (2)The input tax credit as selfassessed in the return of registered person shall be credited to his electronic cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Authority or Appellate Tribunal or court or in any other provisions of this Act or the rules made thereunder or any other law for the time being in force, every person who has collected from any any other person amount as representing the tax under this Act, and has not paid the said amount to the Government, shall forthwith pay the said amount to the Government, irrespective of whether the supplies in respect of which such amount was collected are taxable or not. (2) Where any amount is required to be paid to the Government under subsection (1), and which has not been so paid, the proper officer may serve on the person liable to pay such amount a notice requiring him to show cause as to why the said amount as specified in the notice, should not be paid by him to the Government and why a ITA no. 4670/MUM/2023 Oceaneering International GMBH 20 penalty equivalent to the amount specified in the notice should not be imposed on him under the provisions of this Act Section 73A(3) Finance Act, 1994 Where amount any is required to be paid to the credit of the Central Government under section (1) sub-or sub-section (2), and the same has not been so paid, the Central Excise Officer shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alue of supply shall include any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than this Act (i.e. GST) Taxable value and GST to be mentioned separately invoice on Taxes on services shall be levied by the Government of India and such tax shall collected be and appropriated by the Government of India 20. On perusal of the comparison of the relevant provision of service tax law and GST law it can be seen that both are indirect taxes and is recovered by the service provider on behalf of assessee and as an agent of the Government as such rates are specified and thus, the provision under the service tax law are similar to provision of GST law and therefore, in our opinion the judicial precedents delivered in respect of erstwhile tax law would apply mutatis mutandis to the GST laws also. 21. Otherwise also it would be quirk of a fate that tax collected on behalf of the customer is again to be held as part of taxable income of the assessee who is collecting GST. The assessee is taxable person under the GST laws and shows GST separately in the invoice raised on the customers. We have perused the copy of the sample invoice produced befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deposited with the exchequer, hence there cannot be any iota of doubt that the impugned GST is not in the nature of specified income under Section 44B. 25. Thus, reliance placed by the Hon'ble DRP members in the case of Sedco Forex International Inc. (supra) to treat 'GST similar as 'reimbursement of mobilization charges is misplaced and incorrect. In the case of Sedco Forex International Inc. fixed mobilization charges were agreed between the parties, which could be more or less than the actual expenditure. Thus, reimbursement of mobilization charges' cannot be equated with pure reimbursement which has no element of income. 26. The core argument of the department before us and by the ld. DRP is that amendment in the provisions of Section 145A of the Act brought by Finance Act 2018, since it includes "services" within its code therefore, income has to be computed in accordance with Section 145A and any taxes levied under services is included and for that heavy reliance has been placed on the judgment of Hon'ble High Court of Bombay in the case of Knight Frank (India) Pvt. Ltd (Bombay High Court) [2016] 72 taxmann.com 300 (Bombay). However the Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uired to maintain books of account and/or those who are covered by presumptive scheme of taxation like sections 44AD, 44AE, 44ADA, 44B, 44BB, 44BBA, etc. of the Act? Answer: ICDS is applicable to specified persons having income chargeable under the head Profits and gains of business or profession' or 'Income from other sources. Therefore, the relevant provisions of ICDS shall also apply to the persons computing income under the relevant presumptive taxation scheme. For example, for computing presumptive income of a partnership firm under section 44AD of the Act, the provisions of ICDS on Construction Contract or Revenue recognition shall apply for determining he receipts or turnover, as the case may be." 29. Thus, reliance placed by the DRP on the aforesaid Circular is not valid since Delhi High Court in the case of Chamber of Tax Consultants v. Union of India [2017] 87 taxmann.com 92 (Delhi) held that the aforesaid Circular was ultra vires the provisions of the Act and liable to be struck down. Also, the amendment was introduced vide Finance Act 2018 to bring certainty on the issue of applicability of ICDS and not to validate the circular. Even otherwise, in the aforesa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the subject matter of computation of profit @7.5% and Section 145A has no applicability. Thus we hold that while computing income u/s.44B, GST cannot be included and all the judgments relied upon by the assessee by the Hon'ble High Court and Hon'ble Supreme Court and the Tribunal will apply in this year also. Thus, in our opinion, the minority view of the single member of the DRP is to be upheld that GST cannot be included while computing deemed income u/s.44B, accordingly, this issue is decided in favour of the assessee." 11. Following the said decision, the Coordinate Bench in Seadrill International Ltd. (supra) has held that the GST which is collected as a separate line item in the invoices as a statutory levy cannot be included as part of gross receipts for the purposes of section 44BB of the Act and the relevant findings therein reads as under: "9. The ld DR did not controvert the contention that Section 44B and section 44BB are similarly worded and that the ratio laid down by the coordinate bench in the above case will apply to assessee's case also since the issue contended is identical. We notice that the Co-ordinate Bench in the above decision has held that GS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee. In the result, ground no. 2 of the assessee's appeal is allowed." 6. Considering the decision of Co-ordinate Bench of this Tribunal in assesses own case for earlier assessment years and respectfully following the same, the assessing officer (AO) directed to exclude the amount of GST while computing gross receipt in the hands of assessee. In the result, ground no. 2 & 3 of the appeal is allowed. 7. Ground No. 4 relates to short grant of TDS. We find that the ld. AR of the assessee while making his submission fairly submitted that he has already filed application before the AO vide application dated 25.03.2025 and necessary direction may be given to the AO for verification of fact and allow appropriate relief to the assessee. Considering the fact that assessee has already moved application for rectification of the assessment order, therefore, the AO is directed to verify the TDS claim and allow appropriate relief to the assessee. In the result, ground no. 4 of the appeal is allowed for statistical purposes. Ground no. 5 & 6 are consequential needs no adjudication. 8. Ground no. 1 related to time limit for passing of assessment order. No specific submission was made by ld. AR ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
