• Feb
  • 12
  • 2009

Service Tax Will be Included in Turnover for the Calculation of Presumptive Profit

ITAT, DELHI BENCH `I’ : NEW DELHI

DDIT (Int’l Taxation) v Technip Offshore Contracting BV Appeal No. ITA No. 4613/D/07  Dated: January 16, 2009

RELEVANT PARAGRAPHS:

5.6 In the present case, it is not in dispute that the assessee company has realized service tax on account of providing services and facilities in connection with the exploration or extraction of minerals oils in India. The service tax so realized is a part of receipts received by the assessee from ONGC. The service tax realized by the assessee is in respect of services specified under section 44BB and rendered by it to ONGC. The Hon’ble jurisdiction! High Court of Uttarakhand has held that it is the sum received by the assessee which is to be taken into account for the purpose of “determining profit under section 44BB of the Act and not the actual taxable income as contemplated under section 4 and 5 of the Act.

5.7 The decision of the ITAT, Chennai Bench “C” in the case of ACIT Vs. Real Image Media Technologies (P) Ltd. (supra) relied upon by the learned counsel for the assessee is, in our considered view, gives no assistance to the assessee’s case as we very respectfully submit that in the said decision, the Tribunal has dealt with the issue as to whether the rigour of the provision of section 43B of the Act in respect of the service tax collected by the assessee would be attracted or not. The issue before the Tribunal was with regard to the allowability of deduction within the meaning of section 43B of the Act. This decision was rendered in the context quite different to the context involved in the present case. In the present case, we are concerned with the controversy as to whether the amount of service tax collected by the assessee in respect of the services provided by the assessee is to be included in the total sum for the purpose of determining presumptive profit under section 44BB of the Act. In the said decision of IT AT Chennai Bench, the question whether the service tax collected by the assessee would be included in the total sum for the purpose of section 44BB of the Act, was not there. They were concerned only with the question as to whether the service tax was payable by the assessee so as to attract the rigour of the provision of section 43B of the Act. Merely because the service tax was ultimately payable to the Government as so held by the Chennai Bench of the Tribunal in the above referred case is that by itself cannot be a reason to say that the amount of service tax collected by the assessee is not includible in the total sum for the purpose of section 44BB of the Act. The Hon’ble jurisdictional Uttarakhand High Court has categorically held in the case of Sedco Forex International Inc. Vs. CIT that the section 44BB is a complete code in itself. We are, therefore, supposed to decide this controversy in the context of the specific provisions contained in section 44BB of the Act, and not with regard to the question as to whether the service tax collected by the assessee had become due or payable by the assessee to the Government within the meaning of section 43B of the Act.

5.8 Further the decision of ITAT Delhi “A” Bench in the case of ACIT Vs. Transocean Offshore Deep Water Drilling Inc. (supra) is also of no help to the assessee’s case inasmuch as in that case the amount of excise duty paid towards importing plant and machinery was found to be not on account of provision of services and facilities in connection with, or supply of plant and machinery on higher used, or to be used, in the prospecting fora, or extraction or production mineral oils in India. The Hon’ble Tribunal has given a categorical finding that the reimbursements themselves were not in connection with the specification of services mentioned in section 44BB of the Act. Following the observation of the Tribunal makes the thing clear:-

“:…..In the case of customs duty, it is primarily the obligation of the importer of the plant and machinery which in this case is ONGC. The ONGC’s primary liability is discharging through the medium of the assessee. The payments in question are absolutely not on account of 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 of production of mineral oils in India. In other words, the re imbursements themselves art’ not in connection with the specification of services mentioned in section 44BB of the Act. We, therefore, direct the Assessing Officer to exclude that part of the customs duty from being a part of the receipt for the purpose of determining the profits and gains under section 44BBoftheAct “.

5.9 In the said case of ACIT Vs. Transocean Offshore Deep Water Drilling Inc., the assessee contended before the Tribunal that the reimbursement of expenditure relating to custom duty was not in connection with services and facilities or supply of raw material to be used in the prospecting for, or extraction or production of, mineral oil in India as spelt in section 44BB(2) of the Act. Though, on the other hand, it is an admitted position that a service tax collected by the assessee is directly in connection with services and facilities as spelt out in section 44BB(2) of the Act. It is not the assessee’s case that the amount of service tax collected by the assessee was otherwise than in connection with services and facilities or other activities as spelt in section 44BB(2) of the Act. 5.10 For the reasons given above and respectfully following the proposition laid down by the Hon’ble Jurisdictional Uttarakhand High Court in the above referred cases, we are incline to hold that the Assessing Officer was justified in including the amount of service tax collected by the assessee in connection with the services or facilities or supply specified under section 44BB of the Act, provided by the assessee to ONGC. In the total receipts for the purpose of determining presumptive profit of l0% under section 443B of the Act. Thus, the order of CIT(Appeals) is set aside and that of the Assessing Officer is restored on this issue.


One Response to “Service Tax Will be Included in Turnover for the Calculation of Presumptive Profit”

  1. RAKESH says:

    i m planing to start travel agent business n i want to kwn abt services tax n after how much turn over it will aplicable.n hw to take service tax no

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