For Computing Presumptive Income U/s 44BB, Service Tax Collected For Rendering Services Does Not Form Part Of Gross Receipts: Kolkata ITAT

The Kolkata ITAT recently ruled that service tax is not an amount paid or received for the services rendered by it, when the assessee is only collecting the service tax for passing it on to the Government account.Referring to the decision of Delhi High Court in case of DCIT Vs. Mitchell Drilling International Pvt. Ltd, the Bench comprising Sonjoy Sarma (Judicial Member) and Girish Agrawal (Accountant Member) observed that, “for the purpose of computing the presumptive income of the assessee u/s. 44BB, service tax collected by the assessee on the amount paid to it for rendering the services is not to be included in the gross receipts in terms of section 44BB(2) read with section 44BB(1) of the Act. The High Court also held that service tax is not an amount paid or payable, 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 account.” (Para 10(9.3)As per the brief facts of the case, the assessee is a non-resident company engaged in the business of airlines service for passengers and cargo. The assessee filed its original return of income computed on presumptive basis u/s. 44BBA. A revised return was furnished wherein AO sought explanation in respect of gross receipts as disclosed in the revised return and the gross receipts disclosed in the service tax return for which necessary details and explanation were furnished by the assessee. However, in respect of exclusion of service tax from the gross receipts, AO did not accept the claim of the assessee and held that 'amount of service tax paid as service provider to the tune of certain amount is treated as part of Turnover.' Accordingly, the income of the assessee was assessed and computed at 5% of gross receipts.The Bench noted that assessee is a non-resident engaged in the business of operation of airlines and is subjected to income tax under the Act on presumptive basis in terms of section 44BBA.The Bench noted while relying on the decision of Co-ordinate Bench in the assessee's own case that the expression 'amount paid or payable' in section 44BBA(2)(a) and the expression 'amount received or deemed to be received' in section 44BBA(2)(b) is qualified by the words 'on account of the carriage of passengers, livestock material or goods from any place in India/outside India'.The Bench found that only such amounts which are paid or payable for the service provided by the assessee can form part of the gross receipts for the purpose of computation of gross total income u/s. 44BBA(1).The Bench further found that the service tax collected by the assessee does not have any element of income, it is collected by the assessee from its customers for and on behalf of the Central Government on account of a statutory levy and, therefore, it does not form part of the receipts of the assessee on which income accrues or arises to it.The Coram observed that assessee merely acts as a collection agent for and on behalf of the Central Government and after collection, deposits the service tax so collected into the treasury of the Central Government.Therefore, while considering the decision of Co-ordinate Bench, the ITAT allowed the assessee's appeal. Counsel for Appellant/ Taxpayer: Pratyush JhunjhunwalaCounsel for Respondent/ Department: Abhijit KunduCase Title: Cathay Pacific airways Limited verses Assistant Commissioner of Income TaxCase Number: ITA.420/Kol/2023Click here to read/ download the Order

For Computing Presumptive Income U/s 44BB, Service Tax Collected For Rendering Services Does Not Form Part Of Gross Receipts: Kolkata ITAT

Pankaj Bajpai

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