The Income Tax Appellate Tribunal (ITAT), Kolkata Bench held that Service tax component not includible in Gross receipts for computing deemed taxable income under Section 44BBA of the Income Tax Act, 1961.
The assessee, M/s. Cathay Pacific airways Limited is a non-resident company engaged in the business of airlines service for passengers and cargo. Assessee filed its original return of income reporting total income of Rs.93,83,62,810/- computed on presumptive basis u/s. 44BBA of the Act. In the course of assessment proceedings, a revised computation was furnished showing the gross receipts at Rs.2042,43,00,466/- as against originally reported for an amount of Rs.1876,72,56,148.
In the course of assessment proceedings, the AO sought explanation in respect of gross receipts as disclosed in the revised computation and the gross receipts disclosed in the service tax return for which necessary details and explanation were furnished by the assessee.
However, in respect of exclusion of service tax from the gross receipts, the AO did not accept the claim of the assessee and held in para 8 that “amount of service tax paid as service provider to the tune of Rs.89,12,89,825/- is treated as part of Turnover.” Accordingly, the income of the assessee was assessed and computed at Rs.106,57,79,520/- being 5% of gross receipts.
The CIT(A), accepted with the contention of the assessee and held that service tax so collected by the assessee on behalf of the Central Government in a fiduciary capacity would not fall within the turnover to be considered for deemed income under the presumptive tax u/s. 44BBA of the Act and accordingly directed for deleting the addition made by the Ld. AO and to re-compute the income u/s. 44BBA by excluding the component of service tax. Hence the revenue preferred an appeal before the Tribunal.
The Bench consisting of Sonjoy Sarma, Judicial Member and Girish Agrawal, Accountant Member held that “Considering the facts on record, provisions of section 44BBA of the Act, the decision of High Court of Delhi in Mitchell Drilling International Pvt Ltd as well as the position clarified by CBDT in its two circulars cited, we do not find any reason to interfere with the finding and decision given by the CIT(A) and accordingly, dismiss the ground taken by the revenue on the issue under consideration.”
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