ITAT Delhi held in M/s Sundowner offshore International (Bermuda) Ltd Vs ADIT (International Taxation, Dehradun) that for calculating the gross receipts for sec 44BB, reimbursement of service tax not to be included in gross receipts and 10% of the total gross receipts without considering the service tax would be taken as taxable income of the assesse. Service tax was a statutory liability just like custom duty, excise duty etc. which was to be paid to the government, so not to be included in gross receipts for calculating taxable income.
Facts of the case:
The assesse had filed its return of income u/s 44BB after calculating taxable income at 10% of total gross receipts of Rs 92,02,84,456/- . In that assesse had not included the reimbursement of service tax of Rs 10,08,03,172/- while calculating the gross receipts but AO was of the view that service tax also to be included in gross receipts and 10% taxable income should be calculated on total Rs 102,10,87,628/-(Incl. of service tax) and accordingly he calculated the taxable income at 10% of gross receipts inclusive of service tax and passed assessment order. Assessee filed an appeal with CIT(A) who also upheld the decision of AO then assesse filed an appeal with ITAT.
Contention of the assesse:
Assessee was of the view that service tax was not to be included while calculating the gross receipts for sec 44BB. Assessee relied on the decision given in Ensco Maritime Limited vs. Asstt. Director of Income Tax (Int. Taxation) in ITA No. 5482/Del/2013 (A.Y. 2010-11) in which it was held that service tax not to be included in gross receipts for calculation of taxable income. So AO had erred in e passing order after including service tax in gross receipts.
Contention of the revenue:
Revenue was of the view that as all the reimbursement of expenses like of mobilization charges, demobilization charges and other was included in calculating gross receipts for sec 44BB so service tax should also be included in the gross receipts for sec 44BB just like other reimbursement of expenses, So total gross receipts of the assessee should be Rs 102,10,87,628/- instead of Rs 92,02,84,456/-.
Held by ITAT:
ITAT held after relying on the decision given in case Ensco Maritime Limited vs. Asstt. Director of Income Tax (Int. Taxation) in ITA No. 5482/Del/2013 (A.Y. 2010-11) that service tax was a statutory liability like customs and excise so should not be included in gross receipts for sec 44BB . Reimbursement of service tax is not reimbursement of any other expense, it was a statutory liability to be paid to the government.