Service tax does not form part of gross receipts for computation U/s. 44BB

Dy. DIT (IT) Vs weatherford Oil Tools (ME) Ltd. (ITAT Delhi)

On Issue relating to the service tax, learned AR placed reliance on the decision of the Hon’ble Jurisdiction High Court in the case of CIT vs Mitchell Drilling International P. Ltd. 380 ITR 130 in support of his contention that the service-tax being statutory levy, should not form part of gross receipts as per provision of Section 44BB of the Act. He further placed reliance on the decision of the coordinate bench in the case of DDIT vs Sundowner Offshore International (Bermuda) Ltd. ITA 1067/Del/2016 for a similar principle. We find that the principle laid down in the above decision squarely applies to the facts of this case also, as such, while respectfully following the same, we answer the issue that the service-tax does not form part of the gross receipts for computation u/s 44BB of the Act.

FULL TEXT OF THE ITAT JUDGMENT

Aggrieved by the order dated 23.4.4.2013 in Appeal No.155/CIT(A)-II/13-14 for assessment year 2010-11 passed by the learned CIT(A), Dehradun (for short hereinafter called as “the learned CIT(A)’), the revenue preferred this appeal.

2. Relevant facts are that the assessee is a company incorporated under the laws of British Virgin Islands having its registered office at P.O. Box No.4627, Dubai, United Arab Emirates. The Indian project office situated at 921, Solitaire Corporate Park, 167 Guru Hargovindji Marg, Chakala, Andheri East, Mumbai and is engaged in the business of providing services and facilities in connection with exploration, exploitation and production of mineral oil in India. For the assessment Year 2010-11, the assessee filed their return of income on 13.10.2010, declaring taxable income of Rs.246,667,735/- under the head ‘profits and gains of business and profession’ computed in terms of the presumptive tax scheme of Section 44BB of the Income-tax Act, 1961 (for short called “the Act”. However, during scrutiny u/s 143(3)/144C(3)(b) of the Act, by order dated 14.5.2013, the AO completed the assessment at an income of Rs.489,395,500/-and in that process bifurcating the revenue received by the assessee under contract into equipment rental, services and reimbursement and holding that the revenue received by the assessee on account of provision of oilfields equipment to other than PSC partners was in the nature of royalty u/s 9(1)(vi) of the Act;

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