The New Delhi Bench of the Income Tax Appellate Tribunal (ITAT), ruled that the amount received as reimbursement of service tax not includible in gross turnover for purpose of computing taxable income under Section 44BB of the Income Tax Act, 1961.
On account of difference of opinion between the Accountant Member and Judicial Member of the ITAT Bench New Delhi, the matter has been referred to PM Jagthap, Vice President as Third Member by the President, ITAT for consideration and disposal under Section 255(4) of the Income Tax Act, 1961.
The issue for consideration is whether the amount received as reimbursement of ‘service tax’ is includible in gross turnover for the purpose of computing taxable income under Section 44BB of the Income Tax Act? The assessee, Western Geco International Ltd, is a non-resident company having Permanent Establishment in India.
The Uttarakhand High Court in the case of Director of Income-tax International Taxation Vs. Schlumberger Asia Services Ltd, [2019] 414 ITR 1, wherein it was held that the amount reimbursed to assessee (service provider) by ONGC (service recipient), representing service tax paid earlier by assessee to Government of India, not being an amount paid to assessee on account of providing services and facilities in connection with prospecting for, or extraction or production of, mineral oils in India, would not form part of aggregate amount referred to in clauses (b) of sub-section (2) of Section 44BB of the Income Tax Act.
In Director of Income-tax Vs. Mitchell Drilling International, the Delhi High Court held that the service tax collected by the assessee for passing it on to Government was not to be included in gross receipt in terms of Section 44BB(2) read with Section 44BB(1) of the Income Tax Act for the purpose of computing presumptive income of the assessee under Section 44BB of the Income Tax Act.
The Third Member observed that “the amount received by the assessee as reimbursement of service tax is not includible in gross turnover for the purpose of computing taxable income under Section 44BB of the Income Tax Act.”
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