Service tax not to be included in gross receipts for computing presumptive tax u/s 44BBA

ACIT Vs Cathay Pacific Airways Limited (ITAT Kolkata)

ITAT Kolkata held that 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 for the purpose of computing the presumptive income of the assessee u/s. 44BBA of the Income Tax Act.

Facts- An assessee is a non-resident company engaged in the business of airlines service for passengers and cargo. In the course of assessment proceedings, Ld. AO sought explanation in respect of gross receipts as disclosed in the revised computation and the gross receipts disclosed in the service tax return for which necessary details and explanation were furnished by the assessee. Ld. AO noted that “after considering the reply of the assessee it is observed that assessee has been able to substantiate that there is difference between tax base for service tax and that of ITR and thus no adverse inference is being taken on the score of Service Tax Return data.

However, in respect of exclusion of service tax from the gross receipts, Ld. AO did not accept the claim of the assessee and held that “amount of service tax paid as service provider to the tune of Rs.89,12,89,825/- is treated as part of Turnover.” Accordingly, the income of the assessee was assessed and computed at Rs. 106,57,79,520/- being 5% of gross receipts (including the service tax component referred herein).

Aggrieved, assessee went in appeal before the Ld. CIT(A). Ld. CIT(A) accepted with the contention of the assessee and held that service tax so collected by the assessee on behalf of the Central Government in a fiduciary capacity would not fall within the turnover to be considered for deemed income under the presumptive tax u/s. 44BBA of the Act. He accordingly directed for deleting the addition made by the Ld. AO and to re-compute the income u/s. 44BBA by excluding the component of service tax. Being aggrieved, revenue preferred the present appeal.

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