DCIT Vs Nabors Drilling International Limited (ITAT Mumbai)
Service tax not forms part of total turnover in computing income u/s 44BB
The issue involved in all these appeals is as to whether the ld CITA was justified in holding that the service tax component cannot be included as part of total turnover while computing income u/s 44BB(1) of the Act in the facts and circumstances of the case.
ITAT find that this issue is squarely covered in favour of assessee by the decision of Hon’ble Delhi High Court in the case of DIT vs. Mitchell Drilling International Pvt. Ltd. [2016] 380 ITR 130 (Del) and also CBDT Circular No. 1/ 2014 dated 13.01.2014, wherein it is clarified as under: –
The matter has been examined afresh. In exercise of the powers conferred under section 119 of the Act, the Board has decided that wherever in terms of the agreement/contract between the payer and the payee, the service tax component comprised in the amount payable to a resident is indicated separately, tax shall be deducted at source under Chapter XVII-B of the Act on the amount paid/payable without including such service tax component.
Further, ITAT find that the Uttarakhand High Court in the case of DIT vs. Schlumberger Asia Services Ltd. (2009) 317 ITR 156 (Uttarakhand) had held that customs duty, unlike amounts received towards reimbursement, would not be includible in the total turnover for computing profits u/s.44BB of the Act
When these were pointed to the learned Sr. Departmental Representative, ITAT stated that the issue is covered. As the issue is squarely covered in favour of assessee, ITAT find that the CIT(A) has rightly directed the AO to exclude the service tax from the gross receipts of the assessee for the purpose of determining taxable income under section 44BB of the Act. ITAT find no infirmity in the order of CIT(A) and hence, the appeal of Revenue is dismissed.
