Service Tax paid to the Government has no relevance in determining presumptive Tax: ITAT Mumbai [Read Order]

The Mumbai bench of the Income Tax Appellate Tribunal recently ruled that the amount collected and paid to the government cannot be included to the total income of the assesse for the purpose of computing presumptive tax under section 44B of the Income Tax Act, 1961 since the said amount does not have any element of income. The Tribunal further observed that the said amount, therefore,cannot be included in the gross receipts of the assesse.

In the present case, the assesse filed an appeal before the Tribunal challenging the assessment order in which the assessing officer, for the purpose of determining the presumptive income under section 44B of the Act, included the payment made by the assesse in respect of service tax to the government. The assesse submitted that the issue has been considered and allowed in favour of the assessee by the decisions of Coordinate Bench of the same Tribunal in assessee’s own case for the earlier assessment years.

The Tribunal noticed that the Delhi High Court, in the case Director of Income Tax-I vs. Mitchell Drilling International (P) Ltd, held that for the purpose of computing the presumptive income of the assessee under section 44BB of the Act, the service tax collected by the assessee on the amount paid for rendering services is not to be included in the gross receipts.

Referring to the above judgment along with the decision of the co-ordinate bench, the Tribunal held that the amount of service tax cannot be included for the purpose of computing the ‘presumptive income’ of the assessee under section 44BB of the Act, since service tax collected by the assessee does not have any element of income. The Tribunal opined that the same cannot form part of the gross receipts and consequently directed to delete the addition made in this regard by the authorities below.

Read the full text of the Judgment below.

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