The Supreme Court dismissed the Special Leave Petition (SLP) against an order wherein it was held that service tax on the supply of plant and machinery for hire for extraction of mineral oil does not form part of the aggregate amount.
M/S Transocean Offshore International Ventures Ltd, the petitioner filed the Special leave petition against the order passed by the High Court Of Uttarakhand.
The issue, which came up for consideration before the ITAT, was about the interpretation of Sections 44 BB(1) and 44 BB(2) of the Income Tax Act. The specific issue, that arose for consideration was, whether the service tax collected by the assessees in the course of the provision of services and facilities in connection with, or supply of plant and machinery on hire, in the prospecting for, or extraction or production of, mineral oils in India, was liable to be included in the amount paid or payable for computation of the ‘presumptive taxable income’ of the assessee. The Tribunal while passing the impugned orders, held in favour of the assessee.
The Full Bench in the said judgment held that the amount reimbursed to the assessee (service provider) by the ONGC (service recipient), representing the service tax paid earlier by the assessee to the Government of India, would not form part of the aggregate amount referred to in Clauses (a) and (b) of sub-section (2) of Section 44 BB of the Income Tax Act.
Mr. Bhatia, counsel for the appellant Department submitted that since the tax effect, was less than the prescribed limits, no Special Leave Petition could be preferred before the Supreme Court, and on that account, the judgment of the Full Bench has attained finality. However, in some of the present appeals, the tax effect exceeds the limit set by the Central Board of Direct Taxes for preferring a further appeal to the Supreme Court.
The Full Bench observed that “service tax is a tax levied on services, and cannot be treated as the Service itself. It is difficult, therefore, to accept the submission of the revenue that the amount reimbursed by the ONGC, towards service tax paid earlier by the assessee to the Government, should be included in the amount paid to the assessee on account of the provision of services and facilities. Even otherwise, it is not every amount paid on account of the provision of services and facilities which must be deemed to be the income of the assessee under Section 44BB. It is only such amounts, which are paid to the assessee on account of the services and facilities provided by them, in the prospecting for or extraction or production of mineral oils, which alone must be deemed to be the income of the assessee. On a plain and literal reading of clauses (a) and (b) of Section 44BB of the Act, it is clear that reimbursement of service tax ought not to be included in the aggregate of the amounts specified in clauses (a) and (b) of Section 44BB(2), as it is not an amount received by the assessee on account of services provided by them in the prospecting, extraction or production of mineral oils.”
A two-judge bench of Justice B V Nagarathna and Justice Ujjal Bhuyan held that “We are not inclined to interfere in the matter. The Special Leave Petition is dismissed.” However, there was a delay of 272 days in filing the Special Leave Petition, the court condoned the delay.
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