Case Law Details
Recently Mumbai Bench of the Income-tax Appellate in the case of Islamic Republic of Iran Shipping Lines Vs. DCIT [I.T.A. No. 8845/Mum/2010 dated 20 April, 2011] held that service tax collected from customers on behalf of the Government cannot be included in the total receipts while determining its presumptive income under section 44B of the Income-tax Act, 1961.
Facts
• Islamic Republic of Iran Shipping Lines (“the assessee”), engaged in operation of ships, had filed its tax return for assessment year 2007-08, offering income as per the provisions of section 44B read with section 172 of the Act. It had also received certain sum as service tax collected from its customers which it did not include in the receipts while determining its presumptive income under section 44B of the Act.
• During the course of the assessment proceedings, the assessing officer denied the benefit of section 44B of the Act to the assessee for lack of evidence to substantiate its claim that it is engaged in the business of operation of ships and accordingly, invoked rule 10 of the Income-tax Rules, 1962, assessing the income of the assessee on a presumptive basis at ten percent of the gross receipts. Further, he proposed to include the service tax collected in the gross receipts for determining the presumptive income.
• Against the aforesaid draft order, the assessee filed its objections before the Dispute Resolution Panel (“DRP”). The DRP confirmed the action of the assessing officer regarding denial of the benefit of section 44B of the Act. Further, relying on the decision in the case of DDIT (IT) v. Technip Offshore Contracting BV [2009] 29 SOT 33 (Del), the DRP also confirmed inclusion of the amount of service tax collected in the gross receipts.
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