Service tax amount cannot be included in gross receipt for Tax Audit u/s 44AD

Sagarkumar Ishwarbhai Bhavani Vs ITO (ITAT Mumbai)

ITAT Mumbai held that as service tax doesn’t partake the character of income, the same cannot be included in the gross receipt of the assessee for the purpose of computing Tax Audit applicability u/s 44AD of the Income Tax Act.

Facts- The assessee has preferred the present appeal contesting that CIT(A) has erred in confirming the action of AO in holding that service tax is liable to be included in the turnover for the purpose of taxation under section 44AD of the Income Tax Act.

Conclusion- Held that service tax collected by assessee from its customers is on behalf of the Government and it need to deposited by the assessee in the relevant account of the Government. Therefore, ‘service tax’ collected by assessee does not partake the character of income as referred to in section 5 of the Act; and therefore cannot be included in the gross receipt of assessee for the purpose of computing the presumptive taxation u/s 44AD of the Act.

FULL TEXT OF THE ORDER OF ITAT MUMBAI

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