Cathay Pacific airways Limited Vs ACIT (ITAT Kolkata)
The Income Tax Appellate Tribunal (ITAT) Kolkata, in a series of appeals by Cathay Pacific Airways Limited against the orders of the Commissioner of Income Tax (Appeals), addressed a significant issue concerning the computation of presumptive income under Section 44BBA of the Income-tax Act, 1961. The core question was whether service tax collected by the assessee forms part of the gross receipts for calculating total income on a presumptive basis.
Background and Facts of the Case
Cathay Pacific Airways Limited, a non-resident company engaged in the airline service industry, filed its income return, computing total income on a presumptive basis under Section 44BBA. The controversy arose over the inclusion of service tax in the gross receipts. The Assessing Officer (AO) treated the service tax paid by the airline as part of its turnover, leading to a higher computed income. The appellant contested this, arguing that service tax, being a statutory levy collected on behalf of the government, should not be included in gross receipts for computing presumptive income.
ITAT’s Decision
The ITAT, after reviewing the submissions and the legislative framework of Section 44BBA, decided in favor of the assessee. It highlighted that the service tax collected does not have any element of income for the assessee, as it is merely acting as a collection agent for the government. The Tribunal relied on various judicial precedents, including the landmark decision of the Delhi High Court in the case of Mitchell Drilling International Pvt. Ltd., which clarified that service tax should not be included in the gross receipts for the purpose of computing income under similar presumptive taxation provisions.
