HANJIN SHIPPING COMPANY LTD, MUMBAI V. ADDL DIT (IT) RG 3, MUMBAI

ITA 8672/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8339 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 29-10-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 13-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Presumptive income; Question of law
• Section: 80HHC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH H BENCH BEFORE SHRI I.P.BANSAL (JUDICIAL MEMBER) AND SHRI B. RAJENDRA (ACCOUNTANT MEMBER) ITA NO.8672/MUM/2010 ASSESSMENT YEAR: 2007-08 HANJIN SHIPPING COMPANY LTD., (AGENTS FOR HANJING SHIPPING CO. LTD), 402, VEDANTA, 779, MAKAWANA ROAD, OFF ANDHERI KURLA ROAD, ANDHERI(E), MUMBAI-59 PA NO.AAACH 3759 G ADDL. DIT (IT), RANGE-3, MUMBAI. VS. (RESPONDENT) APPELLANT BY : SHRI SUNIL M LALA & PRASHANT MAH ESWARI RESPONDENT BY: SHRI N.K.MEHTA DATE OF HEARING: 29.10.2012 DATE OF PRONOUNCEMENT: 31.10.2012 ORDER PER I.P.BANSAL, JM: THIS IS APPEAL FILED BY ASSESSEE. IT IS DIRECTED AGAINST ASSESSMENT ORDER DATED 18.10.2010 PASSED UNDER SECTION 144C(13) R.W.S. 143 (3) OF THE I.T.ACT, 1961 AS PER DIRECTION GIVEN BY DRP VIDE ITS ORDER DATED 17.9.20 10 FOR ASSESSMENT YEAR 2007-08. 2. GROUND OF APPEAL READS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD AO HAS LEGALLY ERRED IN PROPOSING AND THE HONBLE DISPUTE RESOLUTION PANEL (DRP) HAS FURTHER ERRED IN CONFIRMING/UPHOLDING THE ADDIT ION OF RS.3,40,76,521 BEING THE AMOUNT OF SERVICE TAX TO THE TOTAL REVENU E FOR THE COMPUTATION OF PROFIT UNDER SECTION 44B OF THE INCOME TAX ACT, 1961(THE ACT). 3. AS IT CAN BE SEEN FROM THE GROUND OF APPEAL RAIS ED BY THE ASSESSEE, THE ONLY GRIEVANCE OF THE ASSESSEE IS THAT SERVICE TAX AMOUN TING TO RS.3,40,76,521 SHOULD NOT BE CONSIDERED AS REVENUE WHILE COMPUTING PROFIT U/S.44 B OF THE ACT. ITA NO.8672/MUM/2010 ASSESSMENT YEAR: 2007-08 2 4. IT WAS SUBMITTED THAT THIS ISSUE IS DIRECTLY COV ERED BY VARIOUS DECISIONS OF THE TRIBUNAL, COPIES OF WHICH HAVE BEEN FILED IN PAPER BOOK BEFORE US. THE DECISIONS ARE AS UNDER: I) ISLAMIC REPUBLIC OF IRAN SHIPPING LINES VS DCIT, 11 TAXMAN.COM.349(MUM) II) SEDCO FOREX INTERNATIONAL DRILLING INC VS. ADIT, 24 TAXMAN .COM 390(DELHI) III) DDIT VS. M/S. MITCHELL DRILLING INT. PTY. LTD.(I.T. A. NO.698/DEL/2012) IV) DIT VA. SCHLUMBERGER ASIA SERVICE LTD., 317 ITR 156 (UTT) 5. ON THE OTHER HAND, LD D.R. RELIED ON THE DECISIO N OF DELHI ITAT IN THE CASE OF DDIT(INT. TAXATION) DEHRADUN VS TECHNIP OFFSHORE CO NTRACTING BV, 29 SOT 33(DELHI), IN WHICH THE SAME ISSUE WAS HELD AGAINST THE ASSESSEE. 6. WE HAVE CAREFULLY CONSIDERED THE CONTENTIONS OF BOTH THE PARTIES. WE FIND THAT WHILE DECIDING THE ISSUE IN THE CASE OF ISLAMIC REP UBLIC OF IRAN SHIPPING LINES (SUPRA), THE TRIBUNAL IN PARA 11 HAS CONSIDERED THE AFORESAI D DECISION OF DELHI ITAT IN THE CASE OF TECHNIP OFFSHORE CONTRACTING (SUPRA) AND AFTER C ONSIDERING ALL THE DECISIONS, THE ISSUE WAS DECIDED IN FAVOUR OF ASSESSEE BY THE FOLLOWING OBSERVATIONS: 13. WE HAVE CONSIDERED RIVAL SUBMISSIONS CAREFULLY AND FIND FORCE IN THE SUBMISSIONS OF THE LD COUNSEL OF THE ASSESSEE. NO D OUBT, IN THE EASE OF TECHNIP OFFSHORE CONTRACTING BV (.SUPRA), IT WAS HELD THAT SERVICE TAX SHOULD BE INCLUDED IN THE TURNOVER FOR COMPUTING THE PROFITS FOR THE P URPOSE OF SECTION 44BB. HOWEVER, IN THIS CASE THE DECISION OF HONBLE BOMBA Y HIGH COURT IN THE CASE OF SUDHARSHAN CHEMICALS INDS (SUPRA) HAS NOT BEEN CONS IDERED. IN THAT CASE THE ISSUE WAS WHETHER SALES TAX AND EXCISE DUTY WAS TO BE INCLUDED IN THE TOTAL TURNOVER FOR THE PURPOSE OF COMPUTING DEDUCTION UND ER SECTION 80 HHC. IT WAS OBSERVED BY THE HONBLE COURT THAT SINCE NO EXCISE DUTY AND SALES TAX WERE LEVIABLE IN RESPECT OF EXPORTS, THEREFORE, WHILE CA LCULATING THE DEDUCTION UNDER SECTION 80HHC BY THE FORMULA PROFITS OF BUSINESS X EXPORT TURNOVER TOTAL TURNOVER IT WOULD NOT BE PROPER TO INCLUDE THE SALES TAX AND EXCISE DUTY IN THE TOTAL TURNOVER, BECAUSE THERE CANNOT BE ANY ELEMENT OF AN D EXCISE DUTY. IN OUR VIEW, THIS PRINCIPLE IS EQUALLY APPLICABLE TO THE SERVICE TAX ALSO. AGAIN THE HONBLE UTTARAKHAND HIGH COURT IN THE CASE OF SCHLUMBERGER ASIA SERVICE LTD (SUPRA) WHEREIN, THE QUESTION WAS WHETHER THE AMOUNT OF CUS TOMS DUTY PAID WAS INCLUDIBLE IN THE TOTAL TURNOVER FOR COMPUTING PROF ITS UNDER SECTION 44BB. THE HONBLE HIGH COURT HAS OBSERVED AT PLACITUM-8 AS UN DER: HAVING CONSIDERED THE SUBMISSIONS OF THE LEARNED C OUNSEL FOR THE PARTIES, WE ARE OF THE VIEW THAT REIMBURSEMENT TOWARDS THE CUST OMS DUTY, PAID BY THE ITA NO.8672/MUM/2010 ASSESSMENT YEAR: 2007-08 3 ASSESSEE, BEING STATUTORY IN NATURE, CANNOT FORM PA RT OF AMOUNT FOR THE PURPOSES OF DEEMED PROFITS UNLIKE THE OTHER AMOUNTS RECEIVED TOWARDS REIMBURSEMENT. THEREFORE, WE DO NOT FIND ANY SUFFICIENT REASON TO INTERFERE WITH THE IMPUGNED ORDERS, PASSED BY THE INCOME-TAX APPELLATE TRIBUNAL , WHICH HAS AFFIRMED THE VIEW TAKEN BY THE COMMISSIONER OF INCOME-TAX [APPEA LS]. THE QUESTION OF LAW STANDS ANSWERED ACCORDINGLY. THEREFORE, WE ARE OF THE VIEW. THAT SERVICE TAX WHI CH IS A STATUTORY LIABILITY, WOULD NOT INVOLVE ANY ELEMENT OF PROFITS AND A SERV ICE PROVIDER IS COLLECTING THE SAME FROM ITS CUSTOMERS ON BEHALF OF THE GOVERNMENT AND ACCORDINGLY, SAME CANNOT BE INCLUDED IN THE TOTAL RECEIPTS FOR DETERM INING THE PRESUMPTIVE INCOME. THEREFORE, WE SET ASIDE THE ORDER OF THE DRP IN THI S REGARD AND DIRECT THE ASSESSING OFFICER NOT TO INCLUDE THE AMOUNT OF SERV ICE TAX IN THE TOTAL RECEIPTS FOR DETERMINING THE INCOME UNDER SECTION 44BB. 7. THUS, IT HAS BEEN HELD BY THE TRIBUNAL THAT THE SERVICE TAX IS A STATUTORY LIABILITY WHICH DOES NOT INVOLVE ANY ELEMENT OF PROFITS AND A SERVICE PROVIDER IS COLLECTING THE SAME FROM ITS CUSTOMERS ON BEHALF OF THE GOVERNMENT AND ACCORDINGLY, SAME CANNOT BE INCLUDED IN THE TOTAL RECEIPTS FOR DETERMINING THE PRESUMPTIVE INCOME AND IN THIS MANNER THE ORDER OF DRP WAS SET ASIDE AND AO WAS DIRECTED NOT TO INCLUDE THE AMOUNT OF SERVICE TAX IN THE TOTAL RECEIPTS FOR DETERMINING T HE INCOME UNDER SECTION 44BB. 8. RESPECTFULLY FOLLOWING THE AFOREMENTIONED DECISI ON OF THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF ISLAMIC REPUBLIC OF IRA N SHIPPING LINES(SUPRA), WHICH HAS CONSIDERED THE DECISION RELIED UPON BY LD D.R., WE DECIDE THIS ISSUE IN FAVOUR OF ASSESSEE. IT MAY ALSO BE MENTIONED THAT LATER ON D ELHI ITAT VIDE ITS DECISION DATED 29.6.2012 IN THE CASE OF SEDCO FOREX INTERNATIONAL DRILLING INC (SUPRA) HAS ADMITTED THE POSITION THAT SERVICE TAX IS A STATUTORY LIABILITY WHICH DOES NOT INVOLVE ANY ELEMENT OF PROFIT AND, THEREFORE, CANNOT BE INCLUDED IN THE TO TAL RECEIPTS FOR DETERMINING PRESUMPTIVE INCOME UNDER SECTION 44BB. THEREFORE, ASSESSEES APPEAL IS ALLOWED ON THE ISSUE RAISED BEFORE US. 9. IN THE RESULT, APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 31 ST OCTOBER, 2012 SD/- (RAJENDRA) ACCOUNTANT MEMBER SD/- (I.P.BANSAL) JUDICIAL MEMBER MUMBAI, DATED 31 ST OCTOBER, 2012 ITA NO.8672/MUM/2010 ASSESSMENT YEAR: 2007-08 4 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX, CONCERNED 4. DEPARTMENTAL REPRESENTATIVE, BENCH H MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI