POWERGEN INFRASTRUCTURE, MUMBAI V. DCIT,(IT),3(3)(2), MUMBAI

ITA 4134/MUM/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2388 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2011-2012
• Appeal Filed On: 05-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N PADMANABAN
• Keywords: Transfer pricing

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI RAJESH KUMAR , ACCOUNTANT MEMBER ITA NO. 4134 /MUM./2017 ( ASSESSMENT YEAR : 20 11 12 ) POWERGEN INFRASTRUCTURE SHRIRAM BHUVAN, 2 ND FLOOR TILAK ROAD, OPP. BEST OFFICE DADAR, MUMBAI 400 014 PAN AAECP9034C . APPELLANT V/S DY. COMMISSIONER OF INCOME TAX (I.T) CIRCLE 3( 3 )(2), MUMBAI . RESPONDENT ASSESSEE BY : NONE REVENUE BY : SHRI N. PADMANABAN DATE OF HEARING 31 . 1 0.2018 DATE OF ORDER 09.11.2018 O R D E R PER SAKTIJIT DEY, J.M. THIS APPEAL HAS BEEN FILED BY THE ASSESSEE CHALLENGING THE ORDER DATED 28 TH FEBRUARY 2017, PASSED BY THE LEARNED COMMISSIONER (APPEALS) 57, MUMBAI, FOR THE ASSESSMENT YEAR 2011 12. 2 . THE DISPUTE IN THE PRESENT APPEAL IS CONFINED TO THE ISSUE AS TO WHETHER SERVICE TAX /VAT COLLECTED BY THE ASSESSEE AND PAID TO THE GOVERNMENT SHOULD FORM PART OF THE TOTAL TURNOVER FOR COMPUTING PROFIT 2 POWERGEN INFRASTRUCTURE UNDER SECTION 44BBB OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT ) ? 3. BRIEF FACTS ARE, THE ASSESSEE , A COMPANY INCORPORATED IN UNITED ARAB EMIRATES (UAE) , IS ENGAGED IN THE BUSINESS OF ENGINEERING, PROCUREMENT AND CONSTRUCTION OF POWER AND TRANSMISSION PROJECTS . I N CONNECTION WITH THE AFORESAID BUSINESS AC TIVITY THE ASSESSEE TOOK UP A PROJECT IN INDIA. FOR THE ASSESSMENT YEAR UNDER DISPUTE, THE ASSESSEE FILED ITS RETURN OF INCOME ON 29 TH NOVEMBER 2011, DECLARING TOTAL INCOME OF ` 126,70,85,520. ON THE BASIS OF ORDER PASSED BY THE TRANSFER PRICING OFFICER AS WELL AS MATERIAL AVAILABLE ON RECORD, THE ASSESSING OFFICER PASSED A DRAFT ASSESSMENT ORDER ON 30 TH MARCH 2015. WHILE COMPUTING INCOME / PROFIT UNDER SECTION 44BBB OF THE ACT I N THE DRAFT ASSESSMENT ORDER, THE ASSESSING OFFICER INCLUDED SERVICE TAX / VAT COLLECTED AND PAID TO THE GOVERNMENT BY THE ASSESSEE. BEING AGGRIEVED OF INCLUSION OF SERVICE TAX IN THE TURNOVER FOR COMPUTATION OF PROFIT UNDER SECTION 44BBB OF THE ACT , THE A SSESSEE PREFERRED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 4. HOWEVER , THE LEARNED COMMISSIONER (APPEALS) UPHELD THE DECISION OF THE ASSESSING OFFICER. 5. WHEN THE APPEAL WAS CALLED FOR HEARING, NO ONE WAS PRESENT ON BEHALF OF THE ASSESSEE TO RE PRESENT THE CASE. EVEN , NO APPLICATION HAS BEEN FILED BY THE ASSESSEE SEEKING ADJOURNMENT OF THE APPEAL. IN VIEW 3 POWERGEN INFRASTRUCTURE OF THE AFOR ESAID, WE PROCEED TO DISPOSE OF THE APPEAL EX PARTE QUA THE ASSESSEE AFTER HEARING THE LEARNED DEPARTMENTAL REPRESENTATIVE. 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY RELYING UPON THE OBSERVATIONS OF THE DEPARTMENTAL AUTHORITIES SUBMITTED , THERE BEING NO INFIRMITY IN THE DECISION TAKEN BY THE DEPARTMENTAL AUTHORITIES IN TREATING SERVICE TAX / VAT AS PART OF TURNOVER, THE ASSESSEES APPEAL SHOULD BE DISMISSED. IN SUPPORT OF HIS CONTENTION, THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE DECISION OF THE TRIBUNAL, MUMBAI BENCH, IN CHINA SHIPPING CONTAINER LINES (HONG KONG) CO. LTD. V/S ADIT, [2013] 38 TAXMANN. COM 002 (MUM.). 7. WE HAVE CONSIDERED THE SUBMISSIONS OF LEARNED DEPARTMENTAL REPRESENTATIVE AND PERUSED MATERIALS ON RECORD. THE SHORT ISSUE ARISING FOR OUR CONSIDERATION IS , WHILE COMPUTING THE PROFIT UNDER SECTION 44BBB OF THE ACT, WHETHER SERVICE TAX / VAT CAN FORM PART OF THE TOTAL TURNOVER OF THE ASSESSEE? NO DOUBT, THE TRIBUNAL, MUMBAI BENCH, IN CHINA SHIPPING CONTAINER LINES (HONG KONG) CO. LTD. (SUPRA) WHILE CONSIDERING IDENTICAL ISSUE ARISING IN CONTEXT OF SECTI ON 44B OF THE ACT WHICH IS PARI MATERIA TO SECTION 44BBB OF THE ACT HAS HELD THAT SERVICE TAX COLLECTED AND PAID TO GOVERNMENT ACCOUNT WILL FORM PART OF THE TOTAL TURNOVER FOR COMPUTING THE PROFIT OF THE ASSESSEE. HOWEVER, AFTER THE AFORESAID DEC ISION BY THE TRIBUNAL, THERE HAVE BEEN SUBSTANTIAL CHANGE / DEVELOPMENT IN LEGAL PROPOSITION PERTAINING TO THE 4 POWERGEN INFRASTRUCTURE DISPUTED ISSUE. THE HON'BLE DELHI HIGH COURT IN DIT V/S MITCHELL DRILLING INTERNATIONAL PVT. LTD., 380 ITR 180 (DEL.) HAS HELD THAT SERVICE TAX COLLECTED AND PAID TO GOVERNMENT ACCOUNT CANNOT FOR M PART OF THE TOTAL TURNOVER OF THE ASSESSEE FOR COMPUTING PROFIT UNDER SECTION 44BB OF THE ACT. THE SAME VIEW HAS BEEN EXPRESSED BY THE HON'BLE UTTARAKHAND HIGH COURT IN DIT V/S SCHLUMBERGER ASIA SERVICES LTD., 317 ITR 156 (UTTARA.). FOLLOWING THE AFORESA ID HIGH COURT DECISION S , THE CO ORDINATE BENCHES OF THE TRIBUNAL IN SEVERAL DECISIONS HAVE ALSO HELD THAT THE SERVICE TAX COLLECTED CANNOT FORM PART OF TOTAL TURNOVER WHILE COMPUTING PROFIT UNDER SECTION 44B AND/OR 44BB OF THE ACT . THUS, IN VIEW OF THE DEC ISIONS OF THE HON'BLE HIGH COURTS REFERRED TO ABOVE WHICH WERE RENDERED IN THE CONTEXT OF SECTION 44BB OF THE ACT, WHICH IS PARI MATERIA TO SECTION 44BBB OF THE ACT, WE HOLD THAT SERVICE TAX / VAT COLLECTED AND PAID TO THE GOVERNMENT ACCOUNT CANNOT FORM PART OF TOTAL TURNOVER OF THE ASSESSEE FOR COMPUTING PROFIT UNDER SECTION 44BBB OF THE ACT. GROUND RAISED IS ALLOWED. 8. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 09.11.2018 SD/ - RAJESH KUMAR ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 09.11.2018 5 POWERGEN INFRASTRUCTURE COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY ( SR. PRIVATE SECRETARY ) ITAT, MUMBAI