GST Collected by Foreign Company not to be Included in Gross Receipts for Computation of Income u/s 44BB: ITAT [Read Order]

The Income Tax Appellate Tribunal ( ITAT ) bench of Mumbai has ruled that the GST (Goods and Services Tax) collected by the foreign company is excluded from Gross Receipts for calculating income under Section 44BB of the Income Tax Act, 1961.

The issues raised by the appellant, Oceaneering International GMBH is the inclusion of GST in the computation of presumptive income under Section 44BB of the Income Tax Act.

Oceaneering International GMBH, a non-resident company registered in Switzerland, specializes in providing equipment and services for oil and gas drilling operations to companies engaged in exploration activities in India.

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For the assessment year 2021-22, the company filed its return, offering income to tax on a presumptive basis as per Section 44BB of the Income tax law, offering gross receipts of Rs. 92.44 crores.. Subsequently, the return was selected for scrutiny, leading to a series of notices and information requests.

The primary contentions raised by the assessee was that the final assessment order was barred by limitation, arguing that the order passed on October 25, 2023, was beyond the 12-month timeline from the end of the relevant assessment year 2021-22, which concluded on March 31, 2023.

Additionally, the assessee contested the inclusion of GST amounting to Rs. 13,10,09,191 in the gross receipts for income computation under Section 44BB(1) of the Act, asserting that GST was collected in a fiduciary capacity and should be excluded.

The Income Tax Assessing Officer (AO) had initially observed that the assessee had received payments on account of GST, which were not included in the gross receipts offered to tax under Section 44BB of Income tax legislation. The AO referred to decisions from the Authority for Advance Ruling and Coordinate Delhi Benches, asserting that GST should form part of the gross receipts for presumptive taxation.

In response, the assessee argued that it collected GST on behalf of the government, acting merely as a link between the service recipient and the Central Government. The assessee relied on previous Tribunal orders and Dispute Resolution Panel (DRP) directions, which had not included service tax in gross receipts.

The DRP, however, confirmed the AO's additions, stating that Section 145A of the Income Tax Act requires GST to be included in the valuation of turnover for determining income chargeable to tax. The DRP also emphasized that the amounts had been "paid" for eligible services and "received/receivable" by the assessee, as reflected in bank statements.

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During the hearing, the assessee reiterated that GST is a statutory levy collected on behalf of the government and deposited into the government treasury, with no element of profit included. It argued that GST should not be considered an amount paid or received for the provision of services related to mineral oil extraction under Section 44BB. The assessee relied on decisions from Coordinate Benches, which held that GST cannot be considered part of the receipt for presumptive taxation under Section 44B of the Act.

The two member bench of Amit Shukla and Vikram Singh Yadav, after hearing arguments and referring the rulings of the coordinate benches in the case of Seadrill International Ltd. V. ACIT and Orient Overseas Container Line Limited V. DCIT, it was  held that “GST would not form part of gross receipts for the purposes of computing income under Section 44BB of the Act and the AO is hereby directed to exclude the amount of Rs 13,10,09,191/- towards GST while computing gross receipts in hands of the assessee.”

Accordingly, the ruling was made in favour of assessee.

To Read the full text of the Order CLICK HERE

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