CHINA SHIPPING CONTAINER LINES (HONG KONG) CO. LTD., MUMBAI V. ASSTT. DIT (IT) - 1(2), MUMBAI

ITA 555/MUM/2014

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3471 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 19-01-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 23-01-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PRAKASH OJHA
• Keywords: Presumptive income; Business income
• Section: 143(3); 80HHC; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C, MUMBAI BEFORE SHRI JASON P. BOAZ ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN, JUDICIAL MEMBER ITA NO. 555/MUM/2014 (ASSESSMENT YEAR : 2010-11) M/S.CHINA SHIPPING CONTAINER LINES (HONG KONG) CO. LTD., C/O. CHINA SHIPPING INDIA PVT. LTD. UNIT NOS. 608-6011, DINASTY BUSINESS PARK, ANDHERI KURLA ROAD, ANDHERI (E), MUMBAI 400 059 PAN:AACCC 5161B ... APPELLANT VS. THE ASSTT. DIRECTOR (INTL.TAXATION) 1(2), SCINDIA HOUSE, 1 ST FLOOR, N.M.ROAD, BALLARD PIER, MUMBAI 400 038 .... RESPONDENT APPELLANT BY : NONE RESPONDENT BY : SHRI PRAKASH OJHA DATE OF HEARING : 19/01/2016 DATE OF PRONOUNCEMENT : 22/01/2016 ORDER PER JASON P. BOAZ, A.M: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE FINAL ORDER OF ASSESSMENT FOR ASSESSMENT YEAR 2010-11 DATED 22/11/ 2013 PASSED UNDER SECTION 143(3) R.W.S. 144C(13) OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT) IN PURSUANCE OF THE DIRECTIONS OF THE DISPUTE RESOLUTION PANEL (DRP)-1, MUMBAI ISSUED ON 18/10/2013 U/S. 1 44C (5) OF THE ACT. 2 ITA NO. 555/MUM/2014 (ASSESSMENT YEAR : 2010-11) SINCE NONE APPEARED FOR THE ASSESSEE, THIS APPEAL W AS DISPOSED OFF WITH THE HELP OF THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE AND THE MATERIAL ON RECORD. 2. THE FACTS OF THE CASE, BRIEFLY, ARE AS UNDER:- 2.1 THE ASSESSEE COMPANY, ENGAGED IN SHIPPING BUSI NESS, FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2010-11 ON 15/ 10/2010 DECLARING TOTAL INCOME OF RS.1,02,53,393/-. THE CASE WAS TAK EN UP FOR SCRUTINY AND THE DRAFT ORDER OF ASSESSMENT WAS COMPLETED U/S . 144C(1) R.W.S. 143(3) OF THE ACT WHEREIN THE INCOME OF THE ASSESSE E WAS DETERMINED AT RS.1,06,42,360/- IN VIEW OF AN ADDITION OF RS.51 ,86,212/- IN RESPECT OF AN ADDITION ON ACCOUNT OF INCLUSION OF SERVICE TAX COLLECTED IN THE ASSESSEES GROSS RECEIPTS FOR THE PURPOSE OF DETERM INING THE TAXABLE INCOME @ 7.5% U/S. 44B OF THE ACT. AGGRIEVED, THE ASSESSEE FILE ITS OBJECTIONS THERETO BEFORE THE DRP. THE DRP ISSUED ITS DIRECTIONS ON 18/10/2013, UPHOLDING THE ASSESSING OFFICERS ACTIO N IN INCLUDING THE SERVICE TAX COLLECTED AS A PART OF THE GROSS RECEIP TS FOR DETERMINING THE TAXABLE INCOME OF THE ASSESSEE U/S. 44B OF THE ACT, BY FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2007-08 IN ITA NO.8516/MUM /2010 DATED 23/08/2013. THE FINAL ASSESSMENT ORDER WAS PASSED IN CONSEQUENCE THEREOF. VIDE ORDER U/S.143(3) R.W.S. 144C OF THE ACT VIDE ORDER DATED 22/11/2013. 3.1 AGGRIEVED BY THE FINAL ORDER OF ASSESSMENT FOR ASSESSMENT YEAR 2010-11 DATED 22/11/2013, THE ASSESSEE HAS PREFERRE D THIS APPEAL RAISING THE FOLLOWING GROUNDS:- 3 ITA NO. 555/MUM/2014 (ASSESSMENT YEAR : 2010-11) 1. GROUND OF APPEAL I: SERVICE TAX COLLECTED CONSI DERED AS INCOME 1.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED ASSISTANT DIRECTOR OF INCOME TAX (INTERNATIONAL TAX ATION) -1(2) ADIT HAS ERRED IN INCLUDING THE AMOUNT OF SERVICE TAX COLLEC TED RS. 51,86,212/-, AS PART OF FREIGHT COLLECTED FOR DETERMINING THE TAXABLE IN COME OF THE APPELLANT. 1.2 THE LEARNED ADIT OUGHT TO HAVE APPRECIATED THAT SERVICE TAX IS A STATUTORY LEVY AND YOUR APPELLANT ACTS AS AN AGENT ON BEHALF OF GOVERNMENT, FOR COLLECTION AND DEPOSIT INTO THE TREASURY. SINCE IT DOES NOT HAVE ANY PROFIT ELEMENT, THE AMOUNT SO COLLECTED SHOULD NOT FORM PA RTY' OF GROSS FREIGHT FOR COMPUTING THE TAXABLE INCOME. 1.3 THE LEARNED ADIT ALSO ERRED IN NOT APPRECIATIN G THAT SERVICE TAX IS NOT A COLLECTION 'ON ACCOUNT OF CARRIAGE GOODS' ETC. SUCH RECEIPTS, THEREFORE, DOES NOT FALL WITHIN THE PROVISION OF SECTION 44B(2) OF THE ACT. 1.4 THE LEARNED ADIT ALSO ERRED IN NOT APPRECIATING THAT SERVICE TAX IS NOT IN THE NATURE OF 'DEMURRAGE CHARGE OR HANDLING CHARGES OR ANY OTHER AMOUNT OF SIMILAR NATURE' TO FALL WITHIN THE EXPLANATION TO S EC. 448(2) OF THE ACT. IT IS THEREFORE PRAYED THAT THE LEARNED ADIT BE DIR ECTED NOT TO INCLUDE SERVICE TAX COLLECTED AS PART OF FREIGHT RECEIPTS, FOR COMP UTING THE TAXABLE INCOME OF YOUR APPELLANT. 3.2 WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATI VE FOR REVENUE AT LENGTH AND PERUSED AND CAREFULLY CONSIDE RED THE MATERIAL ON RECORD, INCLUDING THE JUDICIAL PRONOUNCEMENTS BY A CO-ORDINATE BENCH OF ITAT, MUMBAI IN THE ASSESSEES OWN CASE FOR ASSE SSMENT YEAR 2007- 08 IN ITA NO.8516/MUM/2010 DATED 23/08/2013, RELIED UPON BY THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE. 3.3 GROUND NO.1 (1.1 TO 1.4) (SUPRA) ARE RAISED BY THE ASSESSEE IN RESPECT OF THE INCLUSION OF SERVICE TAX IN THE GROS S RECEIPTS OF THE ASSESSEE FOR DETERMINATION OF THE ASSESSEES TAXABL E INCOME AS PER THE PROVISIONS OF SECTION 44B OF THE ACT. THE ASSESSE E COMPANY, INCORPORATED IN HONG KONG, IS ENGAGED IN SHIPPING BUSINESS (I.E. OPERATION OF SHIPS IN INTERNATIONAL WATERS). THE A SSESSEE HAD COMPUTED 4 ITA NO. 555/MUM/2014 (ASSESSMENT YEAR : 2010-11) ITS TOTAL INCOME @ 7.5% OF TOTAL COLLECTION AS PER THE PROVISIONS OF SECTION 44B R.W.S. 172 OF THE ACT. IN THE COURSE O F ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER FOUND THAT THE A SSESSEE HAS NOT INCLUDED THE SERVICE TAX COLLECTED BY IT IN THE GRO SS RECEIPT FOR THE PURPOSE OF COMPUTING ITS INCOME U/S. 44B OF THE ACT . ON BEING QUERIED BY THE ASSESSING OFFICER AS TO WHY THE SERVICE TAX OF RS.51,86,212/- SHOULD NOT BE CONSIDERED AS PART OF GROSS RECEIPTS FOR THE PURPOSE OF COMPUTATION OF ITS INCOME UNDER SECTION 44B OF THE ACT, THE ASSESSEE SUBMITTED THAT THE SERVICE TAX IS COLLECTED DURING THE YEAR UNDER CONSIDERATION BUT CANNOT BE INCLUDED IN COMPUTING ITS INCOME. THE ASSESSING OFFICER DID NOT ACCEPT THE ASSESSEES CON TENTION AND COMPLETED THE DRAFT OF ASSESSMENT ON 28/03/2013 INC LUDING THE SERVICE TAX COLLECTED AMOUNTING TO RS.51,86,212/- IN THE GR OSS RECEIPTS OF THE ASSESSEE FOR THE PURPOSE OF COMPUTING ITS INCOME AS PER THE PROVISIONS OF SECTION 44B OF THE ACT. THIS DRAFT ORDER OF AS SESSMENT WAS UPHELD BY THE DRP FOLLOWING THE ORDER OF THE CO-ORDINATE BENC H OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2007-08 IN ITA NO.8516/MUM/2010 DATED 23/08/2013. 3.4 WE FIND THAT, AS CONTENDED BY THE LD. DEPARTME NTAL REPRESENTATIVE APPEARING FOR THE REVENUE, THAT THE SAME ISSUE OF INCLUSION OF SERVICE TAX COLLECTIONS IN THE GROSS RECEIPTS OF THE ASSESSEE FOR DETERMINING ITS INCOME U/S.44B OF THE ACT HAS BEEN CONSIDERED AND DECIDED THE ISSUE IN FAVOUR REVENUE AND AGAINST THE ASSESSEE BY THE DECISION OF CO-ORDINATE BENCH OF THIS TRIBUNAL IN T HE ASSESSEES OWN 5 ITA NO. 555/MUM/2014 (ASSESSMENT YEAR : 2010-11) CASE FOR ASSESSMENT YEAR 2007-08 IN ITA NO.8516/MUM /2010 DATED 23/08/2013 HOLDING AS UNDER AT PARAS 8 TO 12 THER EOF:- 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CAR EFULLY GONE THROUGH THE RELEVANT MATERIAL ON RECORD AS WELL AS THE VARIOUS DECISIONS RELIED UPON BY EITHER OF THE PARTIES. WIT H A VIEW TO SIMPLIFY AND RATIONALISE THE ASSESSMENT AND COMPUTATION OF P ROFIT AND GAIN OF SHIPPING BUSINESS IN THE CASE OF NON-RESIDENT THE F INANCE ACT 1975 HAS MADE SPECIAL PROVISION IN SECTION 44B OF THE IN COME TAX ACT. UNDER THIS PROVISION, PROFITS AND GAIN OF NON-RESID ENT FROM THE BUSINESS OF OPERATION OF SHIPS WILL NOT BE CALCULAT ED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 28 TO 43A OF THE INC OME TAX ACT BUT THE SAME WILL BE TAKEN AS 7.5% OF THE AGGREGATE OF THE AMOUNTS PAID OR PAYABLE TO THE ASSESSEE OR TO ANY PERSONS ON HIS BE HALF ON ACCOUNT OF CARRIAGE OF PASSENGERS, LIVESTOCK, MAIL OR GOODS, S HIPPED AT ANY PORT IN INDIA AS WELL THE AMOUNT RECEIVED OR DEEMED TO BE R ECEIVED IN INDIA ON ACCOUNT OF CARRIAGE OF PASSENGERS, LIVESTOCK ETC . AT ANY PORT OUTSIDE INDIA. THUS, FOR THE PURPOSE OF DETERMINATION OF THE INCOME U/S 44B IT IS THE GR OSS AMOUNT WHICH IS AGGREGATE OF THE AMOUNT PAID OR PAYABLE WITHIN OR O UTSIDE INDIA ON ACCOUNT OF CARRIAGE OR SHIPPED AT ANY PORT IN INDIA PLUS ANY AMOUNT RECEIVED OR DEEMED TO RECEIVED IN INDIA ON ACCOUNT OF CARRIAGE OR SHIPPED AT ANY PORT OUTSIDE INDIA. THERE ARE TWO CO MPONENTS OF THE AMOUNTS ONE WHICH IS PAID OR PAYABLE TO THE ASSESSE E IN RESPECT OF THE CARRIAGE OR SHIPPED AT PORT IN INDIA AND ANOTHE R THE AMOUNT RECEIVED OR DEEMED TO RECEIVE IN INDIA IN RESPECT O F CARRIAGE OR SHIPPED AT ANY PORT OUTSIDE INDIA. IT IS PERTINENT TO NOTE THAT SECTION 44B OVER RIDES THE PROVISIONS OF SECTION 28 TO 43A, HOWEVER, THE OTHER PROVISIONS OF THE ACT ARE APPLICABLE APART FROM THE PROVISION OF SECTION 44B FOR COMPUTATION OF INCOME OF NON-RESIDENT ENGAG ED IN THE BUSINESS OF SHIPPING. IT IS PERTINENT TO NOTE THAT THE SALES TAX RECEIPT BY ANY ASSESSEE IS TREATED AS TRADING OR BUSINESS RECE IPT THOUGH THE SALES TAX IS COLLECTED BY THE ASSESSEE ON BEHALF OF THE GOVERNMENT AS HELD BY HONBLE SUPREME COURT IN THE CASE OF CHOWRI NGHEE SALES BUREAU (P) LTD. (SUPRA) IN PARA 9 ASUNDER: 9. THE FACT THAT THE APPELLANT CREDITED THE AMOUNT RECEIVED AS SALES-TAX UNDER THE HEAD SALES-TAX COLLECTION ACCO UNT WOULD NOT, IN OUR OPINION, MAKE ANY MATERIAL DIFFERENCE. IT IS THE TRUE NATURE AND THE QUALITY OF THE RECEIPT AND NOT THE H EAD UNDER WHICH IT IS ENTERED IN THE ACCOUNT BOOKS AS WOULD P ROVE DECISIVE. IF A RECEIPT IS A TRADING RECEIPT, THE FA CT THAT IT IS NOT SO SHOWN IN THE ACCOUNT BOOKS OF THE ASSESSEE WOULD NO T PREVENT THE ASSESSING AUTHORITY FROM TREATING IT AS TRADING RECEIPT. WE MAY IN THIS CONTEXT REFER TO THE CASE OF PUNJAB DIS TILLING INDUSTRIES LTD. VS. CIT (1959) 35 ITR 519 (SC). IN THAT CASE CERTAIN AMOUNTS RECEIVED BY THE ASSESSEE WERE DESCR IBED AS 6 ITA NO. 555/MUM/2014 (ASSESSMENT YEAR : 2010-11) SECURITY DEPOSITS. THIS COURT FOUND THAT THOSE AMOU NTS WERE AN INTEGRAL PART OF THE COMMERCIAL TRANSACTION OF THE SALE OF LIQUOR AND WERE THE ASSESSEES TRADING RECEIPT. IN DEALING WITH THE CONTENTION THAT THOSE AMOUNTS WERE ENTERED IN A SEP ARATE LEDGER TERMED EMPTY BOTTLES RETURN SECURITY DEPOSI T ACCOUNT, THIS COURT OBSERVED. 9. IT IS CLEAR FROM THE DECISION OF HONBLE SUPREME COURT THAT THIS ISSUE OF THE AMOUNT RECEIVED AS SALES TAX IS TREATED AS T RADING RECEIPT OF THE ASSESSEE IS SETTLED. A SIMILAR VIEW HAS BEEN TA KEN BY THE HONBLE SUPREME COURT IN CASE OF ACIT VS T. NAGGI REDDY (SU PRA) AS WELL AS IN CASE OF MCDOWELL & CO. LTD. VS CTO (SUPRA). THE ASSESSEE HAS HEAVILY RELIED UPON THE DECISION OF THIS TRIBUNAL I N CASE OF ISLAMIC REPUBLIC OF IRAN SHIPPING LINES VS DCIT (SUPRA) WHE REIN THIS TRIBUNAL HAS RELIED UPON THE DECISION OF HONBLE HIGH COURT IN CASE OF CIT VS SUDARSHAN CHEMICALS INDUSTRIES LTD. (SUPRA) AND HEL D THAT SERVICE TAX IS STATUTORY LIABILITY AND WOULD NOT INVOLVED ANY E LEMENT OF PROFIT AND ACCORDINGLY THE SAME CANNOT BE INCLUDED IN THE TOTA L RECEIPT FOR DETERMINING THE PRESUMPTIVE INCOME. ON THE OTHER HA ND, THE LD. DR HAS RELIED UPON THE DECISION OF THIS TRIBUNAL IN CA SE OF DDIT VS TECHNIP OF SOURCES CONTRACTING B.V(SUPRA) WHEREIN T HE TRIBUNAL HAS RELIED UPON THE DECISION OF HONBLE UTTARAKHAND HIG H COURT IN CASE OF SEDKO FOREX INC. (SUPRA) AND HELD THAT SERVICE TAX COLLECTED BY THE ASSESSEE IN CONNECTION WITH THE SERVICES SPECIFIED U/S 44BB OF THE ACT WILL BE INCLUDED IN THE TOTAL RECEIPT FOR THE PURPO SE OF DETERMINING THE PRESUMPTIVE PROFIT U/S 44BB. THERE ARE OTHER SIMILA R DECISIONS OF HONBLE UTTARAKHAND HIGH COURT WHEREIN IT HAS BEEN HELD THAT THE HANDLING CHARGES RECEIVED BY THE ASSESSEE WILL BE I NCLUDED IN THE TOTAL RECEIPT FOR THE PURPOSE OF DETERMINATION OF PRESUMP TIVE PROFITS U/S 44BB. THUS, IT IS CLEAR THAT THERE ARE DECISIONS OF THIS TRIBUNAL TAKING DIVERGENT VIEW. THE DECISION IN CASE OF SUDARSHAN C HEMICALS INDUSTRIES LTD. IS IN RESPECT OF TURNOVER FOR THE P URPOSE OF SECTION 80HHC. IT IS PERTINENT TO NOTE THAT SECTION 80HHC O F INCOME TAX ACT ITSELF HAS PROVIDED THE DEFINITION OF EXPORT TURNOV ER AS WELL AS TOTAL TURNOVER AND THE HONBLE HIGH COURT HAS HELD THAT T HE EXCISE DUTY AND SALES TAX CANNOT BE TAKEN INTO ACCOUNT INTO TURNOVE R AS THEY DO NOT HAVE ANY ELEMENT OF PROFIT. THIS VIEW HAS BEEN TAKE N BY THE HONBLE HIGH COURT BY DRAWING ANALOGY FROM THE DEFINITION O F TURNOVER PROVIDED U/S 80HHC ITSELF WHEREIN AS PER THE CLAUSE (B) OF E XPLANATION OF SECTION 80HHC EXPORT TURNOVER IS DEFINE BY EXCLUDIN G FREIGHT AND INSURANCE CHARGES. THEREFORE, ON THE SIMILAR ANALOG Y THE HONBLE HIGH COURT HAS HELD THAT THE EXCISE DUTY AND SALES TAX A LSO HAVE NO ELEMENT OF PROFIT SIMILAR TO THAT OF FREIGHT AND IN SURANCE. HOWEVER NO SUCH EXCLUSION FROM THE AGGREGATE OF AMOUNTS PROVID ED UNDER SUB- SECTION 2 OF SECTION 44B HAS BEEN PERMITTED WHILE C OMPUTING THE PROFITS AND GAINS OF THE SHIPPING BUSINESS IN CASE OF NON-RESIDENT AS PER SECTION 44B. WE QUOTE SECTION 44B AS UNDER: 7 ITA NO. 555/MUM/2014 (ASSESSMENT YEAR : 2010-11) SPECIAL PROVISION FOR COMPUTING PROFITS AND GAINS OF SHIPPING BUSINESS IN THE CASE OF NON-RESIDENTS.44B. (1) NOTWITHSTANDI NG ANYTHING TO THE CONTRARY CONTAINED IN SECTIONS 28 TO 43A IN THE CAS E OF AN ASSESSEE, BEING A NON-RESIDENT, ENGAGED IN THE BUSINESS OF OP ERATION OF SHIPS, A SUM EQUAL TO SEVEN AND A HALF PER CENT OF THE AGGRE GATE OF THE AMOUNTS SPECIFIED IN SUB-SECTION (2) SHALL BE DEEME D TO BE THE PROFITS AND GAINS OF SUCH BUSINESS CHARGEABLE TO TAX UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. (I) THE AMOUNT PAID OR PAYABLE (WHETHER IN OR OUT O F INDIA) TO THE ASSESSEE OR TO ANY PERSON ON HIS BEHALF ON ACCOUNT OF THE CARRIAGE OF PASSENGERS, LIVESTOCK, MAIL OR GOODS SH IPPED AT ANY PORT IN INDIA; AND (II) THE AMOUNT RECEIVED OR DEEM ED TO BE RECEIVED IN INDIA BY OR ON BEHALF OF THE ASSESSEE O N ACCOUNT OF THE CARRIAGE OF PASSENGERS, LIVESTOCK, MAIL OR GOOD S SHIPPED AT ANY PORT OUTSIDE INDIA. EXPLANATION- FOR THE PURPOS ES OF THIS SUB-SECTION, THE AMOUNT REFERRED TO IN CLAUSE (I) O R CLAUSE (II) SHALL INCLUDE THE AMOUNT PAID OR PAYABLE OR RECEIVE D OR DEEMED TO BE RECEIVED, AS THE CASE MAY BE, BY WAY OF DEMUR RAGE CHARGES OR HANDLING CHARGES OR ANY OTHER AMOUNT OF SIMILAR NATURE. 10. AS WE HAVE ALREADY MENTIONED THAT THE PROVISION S OF SECTION 44B HAS BEEN BROUGHT INTO STATUTE TO SIMPLIFY THE DETER MINATION OF TAXABLE INCOME OF THE NON-RESIDENT WHO ARE IN THE BUSINESS OF SHIPPING. THE PRESUMPTIVE PROFITS AND GAIN OF SUCH BUSINESS CHARG EABLE TO TAX UNDER THE PROVISIONS OF SECTION 44B ARE DETERMINED AS A S UM EQUAL TO 7.5% OF THE AGGREGATE AMOUNTS PAID OR PAYABLE TO THE ASS ESSEE ON ACCOUNT OF CARRIAGE OF PASSENGERS ETC. OR GOODS SHIPPED AT ANY PORT IN INDIA AS WELL AS AMOUNT RECEIVED OR DEEMED TO BE RECEIVED IN INDIA ON ACCOUNT OF CARRIAGE OF PASSENGERS OR GOODS SHIPPED AT ANY P ORT OUTSIDE INDIA. THERE IS NO DISPUTE THAT THE SERVICE TAX RECEIVED/C OLLECTED BY THE ASSESSEE IS IN RESPECT OF THE SERVICES PROVIDED ON ACCOUNT OF CARRIAGE OF PASSENGERS OR GOODS SHIPPED EITHER ANY PORT IN I NDIA OR ANY PORT OUTSIDE INDIA. THEREFORE, THE SAID AMOUNT OF SERVIC E TAX IS A PART OF THE INVOICES/BILLS RAISED IN RESPECT OF SHIPPING BUSINE SS. THE EXCLUSION OF THE SAID AMOUNT ONLY ON THE GROUND THAT IT HAS NO E LEMENT OF PROFIT IN OUR VIEW IS NOT CONSISTENT WITH THE INTENTION OF TH E LEGISLATURE WHEN THE AMOUNT RECEIVED OR DEEMED TO BE RECEIVED BY WAY OF DEMURRAGE CHARGE S OR HANDLING CHARGES OR ANY OTHER AMOUNT OF SIMILAR NATURE HAS T O BE INCLUDED TO THE AGGREGATE AMOUNT AS PER SUB-SECTION 2 OF SECTIO N 44B. THE LEGISLATURE HAS MADE IT CLEAR BY INSERTING THE EXPL ANATION THAT THE DEMURRAGE CHARGES OR HANDLING CHARGES OR ANY OTHER SIMILAR AMOUNT WOULD BE PART OF THE AGGREGATE AMOUNT FOR THE PURPO SE OF DETERMINING THE PRESUMPTIVE PROFITS @ 7.5% OF SUCH AMOUNT. IT I S PERTINENT TO NOTE THAT IF THE ELEMENT OF PROFIT IS THE ONLY CRITERIA FOR INCLUSION OR EXCLUSION OF ANY AMOUNT THEN THE DEMURRAGE CHARGES OR HANDLIN G CHARGES SHOULD NOT HAVE BEEN INCLUDED IN THE AGGREGATE AMOU NT FOR THE 8 ITA NO. 555/MUM/2014 (ASSESSMENT YEAR : 2010-11) PURPOSE OF DETERMINING THE PRESUMPTIVE INCOME BECAU SE THE DEMURRAGE CHARGES AND HANDLING CHARGES ALSO NOT HAV ING ANY ELEMENT OF PROFIT. SINCE THE SERVICE TAX ACT HAS BEEN CAME INTO FORCE SUBSEQUENT TO THE INSERTION OF THE EXPLANATION THER EFORE, THERE WAS NO REASON/OCCASION FOR INCLUDING THE SERVICE TAX ALONG WITH THE DEMURRAGE CHARGES AND HANDLING CHARGES IN THE EXPLANATION HOW EVER WHEN ANY OTHER AMOUNT OF SIMILAR NATURE IS REQUIRED TO BE IN CLUDED THEN THE SERVICE TAX AS FAR AS ON THE ASPECT OF HAVING NO EL EMENT OF PROFIT IS SIMILAR IN NATURE TO THAT OF DEMURRAGE CHARGES OR H ANDLING CHARGES. 11. FURTHER THE TERM TURNOVER IS NOT RELEVANT FOR E STIMATION OF PROFIT AND GAIN U/S 44B AND THEREFORE, WHEN THE DEMURREGE CHAR GES AND HANDLING CHARGES ARE SPECIFICALLY INCLUDED IN THE A GGREGATE AMOUNT AS PRESCRIBED UNDER SUB-SECTION 2 THEN WHATEVER AMOUNT RECEIVED OR RECEIVABLE/PAID OR PAYABLE TO THE ASSESSEE ON ACCOU NT OF CARRIAGE OF PASSENGERS ETC. OR GOODS SHIPPED WOULD BE PART OF S UCH AMOUNT FOR COMPUTATION OF PROFIT AND GAINS U/S 44B. THUS, THE THEORY OF ELEMENT OF PROFIT WOULD NOT APPLY TO THE AGGREGATE AMOUNT AS S PECIFIED IN SECTION 2 OF SECTION 44B. MOREOVER SERVICE TAX IS INCIDENTA L TO THE TRANSACTIONS OF CARRIAGE OF PASSENGERS ETC. AND GOODS SHIPPED AN D THE AMOUNT PAID OR PAYABLE TO AND RECEIVED OR RECEIVABLE BY TH E ASSESSEE ON ACCOUNT OF SERVICE TAX IS VERY MUCH PART OF THE AMO UNT RECEIVED ON ACCOUNT OF THE BUSINESS OF SHIPPING. ACCORDING TO T HE NORMAL COMMERCIAL PRACTICE, LEVY OF TAX ON SALE OF GOODS O R SERVICE IS REFLECTED IN THE BILLS EITHER AS MERGED IN THE PRIC E OR BEING SHOWN SEPARATELY. THEREFORE, THE AMOUNT RECEIVED ON ACCOU NT OF SERVICE TAX AS PART OF THE PRICE OF CARRIAGE/SHIPPED SERVICE IS VERY MUCH A TRADING/BUSINESS RECEIPT AND WOULD BE PART OF THE A GGREGATE AMOUNT FOR PRESUMPTIVE PROFIT AND GAIN TO BE DETERMINED U/ S 44B. 12. IN VIEW OF THE ABOVE DISCUSSION WE HOLD THAT TH E SERVICE TAX COLLECTED BY THE ASSESSEE WOULD FORM PART AND PARTI AL OF THE AGGREGATE AMOUNT AS SPECIFIED UNDER SUB-SECTION 2 OF SECTION 44B FOR THE PURPOSE OF DETERMINING THE PROFIT AND GAIN UNDER TH IS SECTION. ACCORDINGLY, WE UPHELD THE ORDERS OF THE AUTHORITIE S BELOW QUA THIS ISSUE. 3.5 FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2007 -08 IN ITA NO.8516/MUM/2010 DATED 28/3/2013, WE HOLD THAT SERV ICE TAX COLLECTED BY THE ASSESSEE WOULD FORM PART AND PARC EL OF THE AGGREGATE AMOUNT AS SPECIFIED IN SUB-SECTION (2) OF SECTION 44B OF THE ACT FOR THE 9 ITA NO. 555/MUM/2014 (ASSESSMENT YEAR : 2010-11) PURPOSE OF DETERMINING THE PROFITS AND GAINS OF THE ASSESSEES BUSINESS UNDER THIS SECTION. IN THIS VIEW OF THE MATTER, WE UPHOLD THE ORDERS OF THE AUTHORITIES BELOW AND CONSEQUENTLY DISMISS THE GROUND-1 (1.1 TO 1.4) RAISED BY THE ASSESSEE. 4. IN THE RESULT, THE ASSESSEES APPEAL FOR THE ASS ESSMENT YEAR 2010- 11 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22/01/2016 SD/- SD/- (SANDEEP GOSAIN) (JASON P. BOAZ) JUDICIAL MEMBER ACCOUNTANT ME MBER MUMBAI, DATED 22/01/2016 VM , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT , 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI