DCIT (International Taxation), Dehradun V. M/s. Dolphin Drilling Ltd., Dehradun

ITA 6672/DEL/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 4239 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 7 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 28-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURNDER PAL
• Assessee Lawyers: VISHAL MISRA
• Keywords: Business income

Judgement Text

1 ITA NO. 6672/DEL/2016 IN THE INCOME TAX APPELLATE TRIBU NAL DELHI BENCH: B NEW DELHI BEFORE SHRI G. D. AGRAWAL, PRESIDENT AND SH. LALIET KUMAR, JUDICI AL MEMBER ITA NO. 6672/DEL/201 6 ( A.Y 2012-13) DCIT (INTERNATIONAL TAXATION) DEHRADUN (APPELLANT) VS DOLPHIN DRILLING LTD. C/O. M/S. NANGIA & CO. 3 RD FLOOR, NCR PLAZA, NEW CANTT, ROAD DEHRADUN AABCD8263C (RESPONDENT) APPELLANT BY SH. SURNDER PAL, CIT DR RESPONDENT BY SH. AMIT ARORA & VISHAL MISRA, CA ORDER PER LALIET KUMAR, JM THE PRESENT APPEAL IS FILED BY THE REVENUE AGAINS T THE ORDER DATED 31/10/2016 PASSED BY CIT(A)-2, NOIDA FOR ASSESSMENT YEAR 2012-13 ON THE FOLLOWING GROUNDS:- ((I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) HAS ERRED IN HOLDING THAT RECEIPTS ON ACCOUNT OF SERVICE TAX ARE NOT INCLUDIBLE IN GROSS REVENUE OF THE ASSESSEE FOR THE PURPOSE OF COMPUTATION OF PROFITS UNDER THE PRO VISIONS OF SECTION 44BB OF THE I.T. ACT, 1961. (II) WHETHER THE CIT (A) HAS ERRED IN NOT APPRECIA TING THE FACT THAT DATE OF HEARING 14.08.2018 DATE OF PRONOUNCEMENT 14.08.2018 2 ITA NO. 6672/DEL/2016 SECTION 44BB OF THE ACT IS A SELF-CONTAINED CODE PR OVIDING FOR COMPUTATION OF PROFIT AT A FIXED PERCENTAGE OF GROSS RECEIPTS O F THE ASSESSEE AND ALL THE DEDUCTIONS AND EXCLUSIONS FROM THE GROSS RECEIPTS A RE DEEMED TO HAVE BEEN ALLOWED TO THE ASSESSEE. (III) WHETHER THE CIT (A) HAS ERRED IN NOT APPRECI ATING THE FACT THAT ONCE THE RECEIPTS ARE OFFERED TO TAX U/S 44BB OF THE ACT WHI CH PROVIDES FOR COMPUTATION OF PROFITS ON GROSS BASIS, THERE IS NO SCOPE FOR COMPUTING OR RE- COMPUTING THE PROFITS BY EXCLUDING ANY PART OF THE RECEIPTS FROM THE TOTAL TURNOVER AS THE SAME WOULD AMOUNT TO DEFEATING THE VERY PURPOSE OF PROVIDING FOR A PRESUMPTIVE SCHEME OF TAXATION U/S 44BB OF THE ACT AND OBVIATING THE NEED FOR MAINTAINING ACCOUNTS FOR IND IVIDUAL RECEIPTS, PAYMENTS ETC. (IV) WHETHER THE CIT (A) HAS ERRED IN IGNORING THE RATIO OF THE JUDGMENT IN THE CASE OF M/S CHOWRINGHEE SALES BUREAU (P) LTD. (82 I TR 542, SC) WHEREIN THE HONBLE APEX COURT HAS HELD THAT THE SALES TAX COLLECTED BY AN ASSESSEE IN THE ORDINARY COURSE OF ITS BUSINESS FOR MS PART OF ITS BUSINESS RECEIPTS. OWING TO THE INHERENT SIMILARITY IN THE N ATURE OF SALES TAX AND SERVICE TAX, THE RATIO OF THE JUDGMENT IN THE SAID CASE IS DIRECTLY APPLICABLE TO THE INSTANT CASE 2. IT WAS THE CASE OF THE REVENUE THAT THE ASSESSIN G OFFICER WAS CORRECT AS HE HAS RIGHTLY TAKEN INTO ACCOUNT THE SERVICE TAX I NTO THE GROSS REVENUE FOR DETERMINING THE PROFIT OF THE ASSESSEE FOR THE YEA R UNDER CONSIDERATION AND, THEREFORE, THE ACTION OF THE LD. CIT ALLOWING THE APPEAL WAS IN CORRECT AND FOR THAT PURPOSES. THE LD. DR RELIED UPON THE DECISION OF THE HON'BLE SUPREME COURT IN THE MATTER OF M/S CHOWRINGHEE SALES BUREA U (P).. VS. CIT(A)., WEST 3 ITA NO. 6672/DEL/2016 BENGAL ON 10 TH OCTOBER, 1972 EQUIVALENT CITATIONS: 1973 AIR 376, 1973 AIR 376, 1973 SCR (2) 618. 3. PER CONTRA, THE LD. AR RELIED UPON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE MATTER OF DCIT VS. MID SHELL DRI LLING INTERNATIONAL PVT. LTD. THE HONBLE DELHI HIGH COURT AFTER CONSIDERING THE BUREAU PVT. LTD. IN PARAGRAPH 14 & 18 HELD AS UNDER:- 14. IN THE CONSIDERED VIEW OF THE COURT, BOTH THE AFOREMENTIONED DECISIONS WERE RENDERED IN THE SPECIFIC CONTEXTS IN WHICH THE QUESTIONS AROSE BEFORE THE COURT. IN OTHER WORDS THE INTERPRE TATION PLACED BY THE COURT ON THE EXPRESSION 'TRADING RECEIPT' OR 'TURNO VER' IN THE SAID DECISIONS WAS DETERMINED BY THE CONTEXT. THE LATER DECISION O F THE SUPREME COURT IN CIT V. LAKSHMI MACHINE WORKS (SUPRA) WHICH SOUGHT TO INTERPRET THE EXPRESSION 'TURNOVER' WAS ALSO IN ANOTHER SPECIFIC CONTEXT. THERE THE QUESTION BEFORE THE SUPREME COURT WAS 'WHETHER EXCI SE DUTY AND SALES TAX WERE INCLUDIBLE IN THE 'TOTAL TURNOVER' WHICH WAS T HE DENOMINATOR IN THE FORMULA CONTAINED IN SECTION 80 HHC (3) AS IT STOOD IN THE MATERIAL TIME?' THE SUPREME COURT CONSIDERED ITS EARLIER DECISION I N CHOWRINGHEE SALES BUREAU (SUPRA) AND ANSWERED THE QUESTION IN THE NEGATIVE. THE SUPREME COURT NOTED THAT FOR THE PURPOSES OF COMPUTING THE 'TOTAL TURNOVER' FOR THE PURPOSE OF SECTION 80 HHC (3) BROKERAGE, COMMISSION , INTEREST ETC. DID NOT FORM PART OF THE BUSINESS PROFITS BECAUSE THEY DID NOT INVOLVE ANY ELEMENT OF EXPORT TURNOVER. IT WAS OBSERVED: 'JUST AS COMMI SSION RECEIVED BY AN ASSESSEE IS RELATABLE TO EXPORTS AND YET IT CANNOT FORM PART OF 'TURNOVER', EXCISE DUTY AND SALES-TAX ALSO CANNOT FORM PART OF THE 'TURNOVER'.' THE OBJECT OF THE LEGISLATURE IN ENACTING SECTION 80 HH C OF THE ACT WAS TO CONFER A BENEFIT ON PROFITS ACCRUING WITH REFERENCE TO EXPORT TURNOVER. THEREFORE, 'TURNOVER' WAS THE REQUIREMENT. 'COMMISS ION, RENT, INTEREST ETC. DID NOT INVOLVE ANY TURNOVER.' IT WAS CONCLUDED THA T 'SALES TAX AND EXCISE 4 ITA NO. 6672/DEL/2016 DUTY' LIKE THE AFOREMENTIONED TOOLS LIKE INTEREST, RENT ETC. 'ALSO DO NOT HAVE ANY ELEMENT OF 'TURN OVER'. 18. THE COURT FURTHER NOTES THAT THE POSITION HAS B EEN MADE EXPLICIT BY THE CBDT ITSELF IN TWO OF ITS CIRCULARS. IN CIRCULA R NO. 4/2008 DATED 28TH APRIL 2008 IT WAS CLARIFIED THAT 'SERVICE TAX PAID BY THE TENANT DOESN'T PARTAKE THE NATURE OF 'INCOME' OF THE LANDLORD. THE LANDLORD ONLY ACTS AS A COLLECTING AGENCY FOR GOVERNMENT FOR COLLECTION OF SERVICE TAX. THEREFORE, IT HAS BEEN DECIDED THAT TAX DEDUCTION AT SOURCE) UNDE R SECTIONS 194-1 OF INCOME TAX ACT WOULD BE REQUIRED TO BE MADE ON THE AMOUNT OF RENT PAID/PAYABLE WITHOUT INCLUDING THE SERVICE TAX.' IN CIRCULAR NO. 1/2014 DATED 13TH JANUARY 2014, IT HAS BEEN CLARIFIED THAT SERVICE TAX IS NOT TO BE INCLUDED IN THE FEES FOR PROFESSIONAL SERVICES OR T ECHNICAL SERVICES AND NO TDS IS REQUIRED TO BE MADE ON THE SERVICE TAX COMPO NENT UNDER SECTION 194J OF THE ACT. 4. HE SUBMITTED THAT THE APPEAL OF THE REVENUE IS R EQUIRED TO BE DISMISSED AND HE IS FURTHER DRAWN OUR ATTENTION TO THE DECISI ON OF THE CO-ORDINATE BENCHE IN THE CASE OF DCIT VS. TRANS OFF SHORE INTE RNATIONAL VENTURES LTD. ITA NO. 898/DEL/2016 WHERE THE IDENTICAL ISSUE WAS DECI DED AGAINST THE REVENUE. 5. WE HAVE CAREFUL CONSIDERED THE RIVAL CONTENTIONS OF PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN OUR VIEW THAT THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE MATTER OF DOLPHIN DRILLING INTERNATIONAL PVT. LTD. (SUPRA) WAS BANG ON THE ISSUE, WHEREIN THE DEC ISION OF THE HON'BLE SUPREME COURT IN THE MATTER OF M/S CHOWRINGHEE SAL ES BUREAU (P). VS. CIT(A). WEST BENGAL (SUPRA) WAS CONSIDERED AND THERE AFT ER THE HON'BLE HIGH COURT WAS HELD SERVICE TAX CANNOT FORM PART OF THE GROSS REVENUE, FOR THE PURPOSE TO COMPUTING THE PROFIT AND GAINS UNDER SECTION 44BB. IN VIEW OF THE ABOVE AND 5 ITA NO. 6672/DEL/2016 RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT WE DISMISS THE APPEAL OF THE REVENUE 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON /8/2018 ORDER PRONOUNCED IN THE OPEN COURT ON 14TH AUGUST , 2018 . SD/- SD/- (G. D. AGRAWAL) (LALIET KUAMR) PRESIDENT JUDICIAL MEMBER DATED: 14/08/2018 R. NAHEED * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI 6 ITA NO. 6672/DEL/2016 DATE OF DICTATION 14.08.2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 14.08.2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS 1 4 .08.2018 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 1 4 .08.2018 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 1 4 .08.2018 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER