CHINA SHIPPING CONTAINER LINES ( HONG KONG) CO. LTD, MUMBAI V. DDIT (IT) RG 1(2), MUMBAI

ITA 7653/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8796 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 18-01-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 24-12-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUBCHAN RAM
• Keywords: Presumptive income; Business income
• Section: 143(3); 80HHC; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'C' BENCH, MUMBAI BEFORE SHRI JASON P. BOAZ, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI , JUDICIAL MEMBER ITA NO. 7653/MUM/2014 (ASSESSMENT YEAR: 2011-12) M/S. CHINA SHIPPING CONTAINER VS. DY. DIRECTOR OF INCOME TAX LINES (HONG KONG) CO. LTD. DYNASTY BUSINESS PARK UNIT NOS. 608-611, ANDHERI- KURLA ROAD, ANDHERI (E) MUMBAI 400059 (INT L . TAXATION) RANGE - 1(2) ROOM NO. 119, 1 ST FLOOR SCINDIA HOUSE, BALLARD PIER MUMBAI 400038 PAN AACCC5161B APPELLANT RESPONDENT APPELLANT BY: NONE RESPONDENT BY: SHRI SUBCHAN RAM DATE OF HEARING: 18.01.2017 DATE OF PRONOUNCEMENT: 20.01.2017 O R D E R PER JASON P. BOAZ, A.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER ASSESSMENT FOR A.Y. 2011-12 PASSED UNDER SECTION 143(3) R.W.S. 144C(13) OF THE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT'), DATED 20 .10.2014 PURSUANT OF THE DIRECTIONS OF THE DISPUTE RESOLUTION PANEL-III, (DR P), MUMBAI ISSUED UNDER SECTION 144C(5) OF THE ACT VIDE ORDER DATED 22.09.2 014. 2.1 IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOL LOWING GROUNDS: - 1. GROUND I : INCLUSION OF SERVICE TAX FOR THE PURP OSE OF PRESUMPTIVE INCOME UNDER SECTION 44B OF THE INCOME TAX ACT, 1961 ('THE ACT') 1.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED DDIT ERRED IN INCLUDING THE AMOUNT OF SERVI CE TAX COLLECTED OF RS 4,598,540, AS PART OF GROSS RECEIPT S FOR DETERMINING THE TAXABLE INCOME OF THE APPELLANT. 1.2 THE LEARNED DDIT FAILED TO APPRECIATE THE FACT THAT SERVICE TAX COLLECTED BY THE APPELLANT IS NOT INCLUDIBLE IN COM PUTING THE TOTAL INCOME UNDER SECTION 44B OF THE ACT SINCE SERVICE T AX IS A ITA NO. 7653/MUM/2014 M/S. CHINA SHIPPING CONTAINER LINES 2 STATUTORY LEVY AND THE APPELLANT ONL Y ACTS AS AGENT ON BEHALF OF GOVERNMENT FOR COLLECTION AND DEPOSIT OF SERVICE TA X INTO THE TREASURY AND THEREFORE, THE AMOUNT SO COLLECTED SHO ULD NOT FORM PART OF GROSS FREIGHT FOR COMPUTING THE TAXABLE INC OME; 1.3 THE LEARNED DDIT FAILED TO APPRECIATE THE FACT THAT SERVICE TAX IS NEITHER A COLLECTION ON ACCOUNT OF CARRIAGE OF GOOD S 'NOR IN NATURE OF 'DEMURRAGE CHARGES OR HANDLING CHARGES OR ANY OT HER AMOUNT OF SIMILAR NATURE 'TO FALL WITHIN THE PURVIEW OF SE CTION 44B OF THE IT ACT; 1.4 THE LEARNED DDIT ERRED IN NOT FOLLOWING THE DE CISION OF THE HON'BLE JURISDICTIONAL INCOME TAX APPELLATE TRIBUNA L IN THE CASE OF ISLAMIC REPUBLIC OF IRAN SHIPPING LINES V DDIT ( 46 SOT 101); 1.5 THE LEARNED DD1T FAILED TO APPRECIATE THAT THE AMOUNT OF SERVICE TAX COLLECTED BY THE APPELLANT AND SUBSEQUENTLY DEP OSITED WITH THE GOVERNMENT TREASURY DOES NOT ENTAIL ANY PROFIT ELEMENT, AS SUCH IT SHOULD NOT FORM PART OF TOTAL INCOME UNDER SECTION 44B OF THE ACT. THE APPELLANT HUMBLY PRAYS THAT THE LEARNED DDIT B E DIRECTED NOT TO INCLUDE SERVICE TAX COLLECTED AND PAID FOR T HE PURPOSE OF COMPUTING PRESUMPTIVE INCOME UNDER 44B OF THE ACT. 2 GROUND 2: INITIATION OF PENALTY PROCEEDING FOR THE LEVY OF PENALTY UNDER SECTION 271(1)(C) 2.1 THE LEARNED DDIT ERRED IN INITIATING PENALTY PR OCEEDING UNDER SECTION 271(1)(C) OF THE ACT. THE APPELLANT HUMBLY PRAYS THAT THE DDIT BE DIRECT ED TO DROP THE PENALTY PROCEEDINGS. 2.2 HEARINGS WERE FIXED ON A NUMBER OF OCCASIONS, B UT NEITHER DID ANYONE APPEAR ON BEHALF OF THE ASSESSEE NOR WAS ANY ADJOUR NMENT SOUGHT ON ITS BEHALF. EVEN NOTICES ISSUED BY RPAD DID NOT ELICIT ANY RESPONSE FROM THE ASSESSEE. THE LEARNED D.R. FOR REVENUE WAS, HOWEVER , PRESENT AND READY TO ARGUE THE CASE. EVEN TODAY WHEN THE CASE WAS CALLED FOR HEARING NONE WAS PRESENT FOR THE ASSESSEE. IN THESE CIRCUMSTANCES, W E ARE OF THE VIEW THAT THE ASSESSEE IS NOT INTERESTED ON PURSUING THIS APP EAL AND THEREFORE PROCEED TO DISPOSE OFF THE SAME WITH THE ASSISTANCE OF THE LEARNED D.R. AND THE MATERIAL ON RECORD. 3. GROUND NO. 1 (1.1 TO 1.4) - INCLUSION OF SERVICE TA X FOR THE PURPOSE OF PRESUMPTIVE INCOME UNDER SECTION 44B OF THE ACT . 3.1 AT THE OUTSET OF THE HEARING, THE LEARNED D.R. FOR REVENUE SUBMITTED THAT THE ISSUE RAISED BY THE ASSESSEE IN THIS GROUN D, I.E. INCLUSION OF ITA NO. 7653/MUM/2014 M/S. CHINA SHIPPING CONTAINER LINES 3 SERVICE TAX IN GROSS RECEIPTS FOR THE PURPOSE OF DE TERMINING PRESUMPTIVE INCOME UNDER SECTION 44B OF THE ACT IS COVERED AGAI NST THE ASSESSEE AND IN FAVOUR OF REVENUE BY THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR A.Y. 2007-08 IN ITA NO. 8561/MUM/2010 DATED 23.08.2013. A COPY OF THE CITED ORDER (SUPRA) WAS PLACED ON RECORD. IT IS SUBMITTED BY THE LEARNED D.R. THAT THE AO HAS FOLLOWED THE AFORESAID ORDER OF THE COORDINATE BENCH WHILE PASSING THE IMP UGNED ORDER. IT IS PRAYED THAT IN VIEW OF THE ABOVE, THE ASSESSEES AP PEAL FOR THIS YEAR BE DISMISSED. 3.2.1 WE HAVE HEARD THE LEARNED D.R. FOR REVENUE AN D PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD; INCLUD ING THE JUDICIAL PRONOUNCEMENTS CITED BY BOTH THE LEARNED D.R. FOR R EVENUE (SUPRA) AND BY THE ASSESSEE IN THE GROUNDS OF APPEAL (SUPRA). WE F IND THAT, AS CONTENDED BY THE LEARNED D.R. FOR REVENUE, THE ISSUE OF INCLU SION OF SERVICE TAX IN GROSS RECEIPTS FOR THE PURPOSE OF DETERMINING PRESU MPTIVE INCOME UNDER SECTION 44B OF THE ACT HAS BEEN AFFIRMED IN FAVOUR OF REVENUE AND AGAINST THE ASSESSEE BY THE DECISION OF THE COORDINATE BENC H IN THE ASSESSEES OWN CASE FOR A.Y. 2007-08 IN ITA NO. 8516/MUM/2010 DATE D 23.08.2013; CONSIDERING THE ISSUE AND HOLDING AS UNDER AT PARAS 8 TO 12 THEREOF: - 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 INCOME 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 B E RECEIVED IN INDIA ON ACCOUNT OF CARRIAGE OF PASSENGERS, LIVESTOCK ETC . AT ANY PORT OUTSIDE INDIA. THUS, FOR THE PURPOSE ITA NO. 8516/M/2010 CH INA SHIPPING CONTAINER LINES (HONG KONG CO. LTD.) OF DETERMINATI ON OF THE INCOME U/S 44B IT IS THE GROSS AMOUNT WHICH IS AGGREGATE O F THE AMOUNT PAID OR PAYABLE WITHIN OR OUTSIDE INDIA ON ACCOUNT OF CA RRIAGE OR SHIPPED AT ANY PORT IN INDIA PLUS ANY AMOUNT RECEIVED OR DE EMED TO RECEIVED IN INDIA ON ACCOUNT OF CARRIAGE OR SHIPPED AT ANY P ORT OUTSIDE INDIA. ITA NO. 7653/MUM/2014 M/S. CHINA SHIPPING CONTAINER LINES 4 THERE ARE TWO COMPONENTS OF THE AMOUNTS ONE WHICH I S PAID OR PAYABLE TO THE ASSESSEE IN RESPECT OF THE CARRIAGE OR SHIPPED AT PORT IN INDIA AND ANOTHER THE AMOUNT RECEIVED OR DEEMED TO RECEIVE IN INDIA IN RESPECT OF CARRIAGE OR SHIPPED AT ANY PORT OUTSI DE 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 APPL ICABLE APART FROM THE PROVISION OF SECTION 44B FOR COMPUTATION OF INCOME OF NON-RESIDENT ENGAGED IN THE BUSINESS OF SHIPPING. I T IS PERTINENT TO NOTE THAT THE SALESTAX RECEIPT BY ANY ASSESSEE IS T REATED AS TRADING OR BUSINESS RECEIPT THOUGH THE SALES TAX IS COLLECTED BY THE ASSESSEE ON BEHALF OF THE GOVERNMENT AS HELD BY HONBLE SUPREME COURT IN THE CASE OF CHOWRINGHEE SALES BUREAU (P) LTD. (SUPRA) I N PARA 9 AS UNDER: 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 FACT THAT IT IS NOT SO SHOWN IN THE ACCOUNT BOOKS OF THE ASSESSEE WOULD NOT PREVENT THE ASSESSING AUTHORITY FROM TREATING IT AS TRADING REC EIPT. WE MAY IN THIS CONTEXT REFER TO THE CASE OF PUNJAB DISTILLING INDUSTRIES LTD. VS. CIT (1959) 35 ITR 519 (SC). IN THAT CASE CERTAIN AMOUN TS RECEIVED BY THE ASSESSEE WERE DESCRIBED AS SECURITY DEPOSITS. THIS COURT FOUND THAT THOSE AMOUNTS WERE AN INTEGRA L PART OF THE COMMERCIAL TRANSACTION OF THE SALE OF LIQUOR AND WE RE THE ASSESSEES TRADING RECEIPT. IN DEALING WITH THE ITA NO. 8516/M/2010 CHINA SHIPPING CONTAINER LINES (HONG KO NG CO. LTD. CONTENTION THAT THOSE AMOUNTS WERE ENTERED IN A SEP ARATE LEDGER TERMED EMPTY BOTTLES RETURN SECURITY DEPOSIT ACCOU NT, 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 TREATE D AS TRADING RECEIPT OF THE ASSESSEE IS SETTLED. A SIMILAR VIEW HAS BEEN TAKEN BY THE HONBLE SUPREME COURT IN CASE OF ACIT VS T. NAGGI R EDDY (SUPRA) AS WELL AS IN CASE OF MCDOWELL & CO. LTD. VS CTO (SUPR A). THE ASSESSEE HAS HEAVILY RELIED UPON THE DECISION OF THIS TRIBUN AL IN 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 A NY ELEMENT OF PROFIT AND ACCORDINGLY THE SAME CANNOT BE INCLUDED IN THE TOTAL 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 THE 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 ITA NO. 7653/MUM/2014 M/S. CHINA SHIPPING CONTAINER LINES 5 ACT WILL BE INCLUDED IN THE TOTAL RECEIPT FOR THE P URPOSE OF DETERMINING THE PRESUMPTIVE PROFIT U/S 44BB. THERE ARE OTHER SI MILAR 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 P RESUMPTIVE PROFITS U/S 44BB. THUS, IT IS CLEAR THAT THERE ARE DECISION S OF THIS TRIBUNAL ITA NO. 8516/M/2010 CHINA SHIPPING CONTAINER LINES (HONG KONG CO. LTD.) TAKING DIVERGENT VIEW. THE DECISION IN C ASE OF SUDARSHAN CHEMICALS INDUSTRIES LTD. IS IN RESPECT OF TURNOVER FOR THE PURPOSE OF SECTION 80HHC . IT IS PERTINENT TO NOTE THAT SECTION 80HHC OF INCOME TAX ACT ITSELF HAS PROVIDED THE DEFINITION OF EXPOR T TURNOVER AS WELL AS TOTAL TURNOVER AND THE HONBLE HIGH COURT HAS HELD THAT THE EXCISE DUTY AND SALES TAX CANNOT BE TAKEN INTO ACCOUNT INT O TURNOVER AS THEY DO NOT HAVE ANY ELEMENT OF PROFIT. THIS VIEW HAS BE EN TAKEN BY THE HONBLE HIGH COURT BY DRAWING ANALOGY FROM THE DEFI NITION OF TURNOVER PROVIDED U/S 80HHC ITSELF WHEREIN AS PER THE CLAUSE (B) OF EXPLANATION OF SECTION 80HHC EXPORT TURNOVER IS DEFINE BY EXCLUDING FREIGHT AND INSURANCE CHARGES. THEREFORE, ON THE SI MILAR ANALOGY THE HONBLE HIGH COURT HAS HELD THAT THE EXCISE DUTY AN D SALES TAX ALSO HAVE NO ELEMENT OF PROFIT SIMILAR TO THAT OF FREIGH T AND INSURANCE. HOWEVER NO SUCH EXCLUSION FROM THE AGGREGATE OF AMO UNTS PROVIDED UNDER SUB-SECTION 2 OF SECTION 44B HAS BEEN PERMITTED WHILE COMPUTING THE PROFITS AND GAINS OF THE SHIPPING BUS INESS IN CASE OF NON-RESIDENT AS PER SECTION 44B . WE QUOTE SECTION 44B AS UNDER : SPECIAL PROVISION FOR COMPUTING PROFITS AND GAINS OF SHIPPING BUSINESS IN THE CASE OF NON-RESIDENTS. 44B. (1) NOTWITHSTANDING ANYTHING TO THE CONTRARY C ONTAINED IN SECTIONS 28 TO 43A IN THE CASE OF AN ASSESSEE, BEIN G A NONRESIDENT, ENGAGED IN THE BUSINESS OF OPERATION OF SHIPS, A SU M EQUAL TO SEVEN AND A HALF PER CENT OF THE AGGREGATE OF THE AMOUNTS SPECIFIED IN SUB- SECTION (2) SHALL BE DEEMED TO BE THE PROFITS AND G AINS 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 OF IN DIA) 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 ITA NO. 8516/M/2010 CHINA SHIPPI NG CONTAINER LINES (HONG KONG CO. LTD.) (II) (II) THE AMOUNT RECEIVED OR DEEMED TO BE RECEIVED I N INDIA BY OR ON BEHALF OF THE ASSESSEE ON ACCOUNT OF THE CARR IAGE OF PASSENGERS, LIVESTOCK, MAIL OR GOODS SHIPPED AT ANY PORT OUTSIDE INDIA. (III) EXPLANATION- FOR THE PURPOSES OF THIS SUB-SECTION, THE AMOUNT REFERRED TO IN CLAUSE (I) OR CLAUSE (II) SHALL INCL UDE THE AMOUNT PAID OR PAYABLE OR RECEIVED OR DEEMED TO BE RECEIVED, AS THE CASE MAY BE, BY WAY OF DEMURRAGE CHARGES OR HANDLING CHARGES OR ANY OTHER AMOUNT OF SIMILAR NATURE. ITA NO. 7653/MUM/2014 M/S. CHINA SHIPPING CONTAINER LINES 6 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 SUM EQUAL TO 7.5% OF THE AGGREGATE AMOUNTS PAID OR PAYABLE TO THE ASSESS EE 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 INDI A 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 CHARGES OR HANDLING CHARGES OR ANY OTHER AMOUNT OF SIMILAR NATURE HAS TO BE INCLUDED TO THE AGGREGATE AMOUNT AS PER SUB-S ECTION 2 OF SECTION 44B . THE LEGISLATURE ITA NO. 8516/M/2010 CHINA SHIPPIN G CONTAINER LINES (HONG KONG CO. LTD. HAS MADE IT CLEAR BY INSE RTING THE EXPLANATION THAT THE DEMURRAGE CHARGES OR HANDLING CHARGES OR ANY OTHER SIMILAR AMOUNT WOULD BE PART OF THE AGGREGATE AMOUNT FOR THE PURPOSE OF DETERMINING THE PRESUMPTIVE PROFITS @ 7. 5% OF SUCH AMOUNT. IT IS PERTINENT TO NOTE THAT IF THE ELEMENT OF PROF IT IS THE ONLY CRITERIA FOR INCLUSION OR EXCLUSION OF ANY AMOUNT THEN THE DEMUR RAGE CHARGES OR HANDLING CHARGES SHOULD NOT HAVE BEEN INCLUDED IN T HE AGGREGATE AMOUNT FOR THE PURPOSE OF DETERMINING THE PRESUMPTI VE INCOME BECAUSE THE DEMURRAGE CHARGES AND HANDLING CHARGES ALSO NOT HAVING ANY ELEMENT OF PROFIT. SINCE THE SERVICE TAX ACT HAS BE EN 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 DEMURREGE 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 CHARGES 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 A S SPECIFIED IN SUB- ITA NO. 8516/M/2010 CHINA SHIPPING CONTAINER LINES (HONG KONG CO. LTD. 13 SECTION 2 OF SECTION 44B. MOREOVER SERV ICE TAX IS INCIDENTAL TO THE TRANSACTIONS OF CARRIAGE OF PASSENGERS ETC. AND GOODS SHIPPED AND THE AMOUNT PAID OR PAYABLE TO AND RECEIVED OR R ECEIVABLE BY THE ITA NO. 7653/MUM/2014 M/S. CHINA SHIPPING CONTAINER LINES 7 ASSESSEE ON ACCOUNT OF SERVICE TAX IS VERY MUCH PAR T OF THE AMOUNT RECEIVED ON ACCOUNT OF THE BUSINESS OF SHIPPING. AC CORDING TO THE NORMAL COMMERCIAL PRACTICE, LEVY OF TAX ON SALE OF GOODS OR 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 THIS SECTI ON. ACCORDINGLY, WE UPHELD THE ORDERS OF THE AUTHORITIES BELOW QUA THIS ISSUE. 3.2.2 FOLLOWING THE AFORESAID DECISION OF THE COORD INATE BENCH IN THE ASSESSEES OWN CASE FOR A.Y. 2007-08 (SUPRA), WE HO LD THAT SERVICE TAX COLLECTED BY THE ASSESSEE WOULD FORM PART AND PARCE L OF THE AGGREGATE AMOUNT AS SPECIFIED UNDER SUB SECTION (2) OF SECTIO N 44B OF THE ACT FOR THE PURPOSE OF DETERMINING THE INCOME/PROFIT AND GAIN T HEREUNDER. WE, THEREFORE, UPHOLD THE IMPUGNED ORDER AND CONSEQUENT LY DISMISS GROUND NO. 1 (1.1 TO 1.4) RAISED BY THE ASSESSEE. 4. GROUND 2 - INITIATION OF PENALTY PROCEEDING FOR THE LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT 4.1 IN THIS GROUND, THE ASSESSEE HAS CHALLENGED THE ACTION OF THE ASSESSING OFFICER IN INITIATING PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT. WE FIND THAT SINCE NO PENALTY UNDER SEC TION 271(1)(C) OF THE ACT HAS BEEN LEVIED ON THE ASSESSEE FOR A.Y. 2011-12 IN THE IMPUGNED ORDER, NO CAUSE OF GRIEVANCE ARISES TO THE ASSESSEE BY MER E INITIATION OF THESE PENALTY PROCEEDINGS. THIS GROUND, BEING PREMATURE, IS NOT MAINTAINABLE AND IS ACCORDINGLY DISMISSED AS INFRUCTUOUS. 5. IN THE RESULT, THE ASSESSEES APPEAL FOR A.Y. 2011- 12 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH JANUARY, 2017. SD/ - SD/ - (RAM LAL NEGI) (JASON P. BOAZ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 20 TH JANUARY, 2017 ITA NO. 7653/MUM/2014 M/S. CHINA SHIPPING CONTAINER LINES 8 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE DRP-III, MUMBAI 4. THE CIT CONCERNED 5. THE DR, C BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.