Income Tax Appellate Tribunal - Mumbai
Islamic Republic Of Iran Shipping ... vs Assessee on 17 February, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
"I" BENCH, MUMBAI
BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND
SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER
ITA no.4877/Mum./2014
(Assessment Year : 2010-11)
Islamic Republic of Iran Shipping Lines
C/o Samsara Shipping Pvt. Ltd.
101/102, Technopolis Knowledge Park ................ Appellant
Andheri (E), Mumbai 400 093
PAN - AABCI2640C
v/s
Dy. Director of Income Tax (I.T)
................ Respondent
Circle-3(1), Mumbai
ITA no.5409/Mum./2014
(Assessment Year : 2009-10)
Dy. Director of Income Tax (I.T)
................ Appellant
Ward-3(1), Mumbai
v/s
Islamic Republic of Iran Shipping Lines
C/o Samsara Shipping Pvt. Ltd.
101/102, Technopolis Knowledge Park ................ Respondent
Andheri (E), Mumbai 400 093
PAN - AABCI2640C
Assessee by : Shri Jiger Saiya
Revenue by : Shri Nail Philip
Date of Hearing - 08.02.2016 Date of Order - 17.02.2016
ORDER
PER SAKTIJIT DEY, J.M.
These two appeals by the assessee and the Revenue are directed against two separate orders of the learned Commissioner (Appeals) for the assessment years 2009-10 and 2010-11. As facts and issues involve in both the appeals are more or less common, 2 Islamic Republic of Iran Shipping Lines these were heard together and are being disposed off by way of this consolidated order for the sake of convenience.
2. Grounds no.1, 2 and 3 of Department's appeal in ITA no.5409/ Mum./2014, for assessment year 2009-10, are corresponding to grounds no.1, 2, 3 and 4 of assessee's appeal in ITA no.4877/Mum./2014, for the assessment year 2010-11, and relates to the issue whether service tax collected by the assessee should be included in the business profit for determining the income chargeable to tax under section 44BB of the Act.
3. Briefly stated the facts are, assessee a non-resident company incorporated in the country of Iran is engaged in the business of operation of ships. As far as shipping operations in India is concerned, assessee has appointed M/s. Samsara Shipping Pvt. Ltd. as its shipping agent. For the assessment year 2009-10, assessee filed its return of income on 30th September 2009, declaring total income of ` 7,47,97,938. In the course of assessment proceedings, the Assessing Officer, while verifying assessee's return found that while computing its income by applying the provisions of section 44B, assessee has not included the amount of service tax collected during the year amounting to ` 2,09,37,727, in the gross receipts. 3
Islamic Republic of Iran Shipping Lines He, therefore, called upon the assessee to show cause as to why the service tax collected should not be included in the gross receipts for computing the income under section 44B. In response, though the assessee relying upon the decision of the Hon'ble Uttarakhand High Court in DIT(IT) v/s Schlumberger Asia Services Ltd., [2009] 317 ITR 156 (UTR), submitted that service tax being a statutory levy co;;ected on behalf of the Government, there is no profit element involved, hence, should not be included in the gross receipts for computing taxable income, the Assessing Officer rejecting the claim of the assessee held that service tax collected amounting to ` 2,09,39,727, will form part of the gross receipts for computing income under section 44B. Similarly, for assessment year 2010-11, the Assessing Officer completed the assessment by holding that service tax collected by the assessee should be included for the purpose of computing income under section 44B. Being aggrieved of the assessment order passed for the assessment year 2009-10 and 2010-11, assessee preferred appeal before the learned Commissioner (Appeals).
4. As far as assessment year 2009-10 is concerned, the learned Commissioner (Appeals) taking into the consideration the fact that 4 Islamic Republic of Iran Shipping Lines identical issue was decided in favour of the assessee by the Tribunal in assessee's own case for the assessment year 2007-08 in ITA no.8845/ Mum./2010, dated 20th April 2011, followed the same and allowed assessee's claim. However, as far as the assessment year 2010-11 is concerned, though, first appellate authority was conscious of the fact that in assessee's own case for assessment year 2007-08, the issue in dispute has been decided in assessee's favour by the Tribunal, but, relying upon a decision of the Tribunal, Mumbai Bench, in China Shipping Container Lines (Hong Kong) Core Ltd. v/s ADIT, ITA no.8516/Mum./2010, dated 23rd August 2010, wherein it was held that service tax will form part of the gross receipts for computing income under section 44B, decided the issue against the assessee by upholding the assessment order. While the department had challenged the order passed by the first appellate authority in assessee's favour, assessee is challenging the decision against it by the learned CIT(A) on the very same issue.
5. The learned Counsel for the assessee submitted before us, the issue whether service tax should form part of gross receipts having already decided by the Tribunal in assessee's own case for assessment year 2007-08, in assessee's favour, the same is binding 5 Islamic Republic of Iran Shipping Lines as far as present assessee is concerned. Learned counsel, relying upon the decision of the Tribunal, Mumbai Bench, in Marubeni Corporation v/s DCIT, [2014] 44 Taxmann.com 22 (Mum.), submitted when there is an order of the Tribunal deciding the particular issue in assessee's own case for the earlier assessment year, the same will be a binding precedent unless there is change in law or change in facts and circumstance of the case. Further, learned Counsel for the assessee relied upon the decision of the Hon'ble Delhi High Court in DIT v/s Mitchell Drilling International Pvt. Ltd., [2015] 62 Taxmann.com 24 (Del.). Learned counsel also tried to distinguish the decision of the co-ordinate bench of the Tribunal in China Shipping Container Lines (Hong Kong) Co. Ltd. v/s ADIT, ITA no.8561/Mum./2010, order dated 23rd August 2013,
6. Learned Departmental Representative, however, relying upon the decision of the Tribunal in China Shipping Container Lines (Hong Kong) Co. Ltd. (supra) and specifically drawing our attention to Para-10 of the order submitted that service tax collected by the assessee should also form part of the gross receipt by computing income under section 44B.
6
Islamic Republic of Iran Shipping Lines
7. We have considered the submissions of the parties and perused the material available on record. We have also carefully applied our mind to the decision cited by both the learned Representative of the parties. Undisputedly, the core issue in dispute is whether service tax collected by the assessee should form part of the gross receipt while computing income under section 44B / 44BB of the Act. It is the contention of the assessee that as service tax collected by the assessee is on behalf of the Government and there is no profit element involved, it cannot and should not form part of the gross receipt while computing income under section 44B / 44BB of the Act. Whereas, it is the stand of the Department that in view of the decision of the co-ordinate bench of the Tribunal in China Shipping Container Lines (Hong Kong) Co. Ltd. (supra), it should form part of the gross receipt for computing income of the assessee. As could be seen, the very same dispute arose in assessee's own case for assessment year 2007-08 before the Tribunal. The Tribunal while deciding the issue held as under:-
"13. We have considered the rival submissions carefully and find force in the submissions of the Ld. counsel of the assessee. No doubt, in the case of DDIT [I.T.] vs. Techip Offshore Contacting BV [supra], it was held that service tax would be included in the turnover for computing the profits for the purpose of section 44BB. However, in this case the decision of Hon'ble Bombay High Court in the case of CIT vs. Sudershan Chemical Inds. [supra] 7 Islamic Republic of Iran Shipping Lines has not been considered. 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 u/s.80HHC. It was observed by the Hon'ble Court that since no excise duty and sales tax were leviable in respect of exports, therefore, while calculating the deduction u/s.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 profit in sales tax and excise duty. In our view, this principle is equally applicable to the service tax also. Again the Hon'ble Uttarakhand High Court in the case of DIT [IT] vs. Schlumberger Asia Services Ltd. [supra], wherein the question was whether the amount of customs duty paid was includible in the total turnover for computing profits u/s.44BB. The Hon'ble High Court has observed at placitum-8 as under: "Having considered the submissions of the learned counsel for the parties, we are of the view that reimbursement towards the customs duty, paid by the assessee, being statutory in nature, cannot form part 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 [Appeals]. The question of law stands answered accordingly." Therefore, we are of the view, that service tax which is a statutory liability, would 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. Therefore, we set aside the order of the DRP in this regard and direct the Assessing Officer not to include the amount of service tax in the total receipts for determining the income u/s.44B."
8. On a reading of the observations of the Tribunal, it is very much clear that the Bench held that service tax being statutory liability collected by the assessee on behalf of the Government cannot be included in the total receipts for determining the income under the provisions of section 44B. However, we need to mention 8 Islamic Republic of Iran Shipping Lines that the Tribunal in China Shipping Container (supra) has taken a contrary view by holding that though service tax collected may not be having any profit element but still the same being similar in nature to demurrage charges and handling charges as provided in Explanation to section 44B, have to be included in the gross receipt for determining profit under section 44B. In view of the conflicting decision of the Co-ordinate bench of the Tribunal, the issue which arise for consideration is, which decision is to be followed in the present situation. In this context, we may refer to the decision of the Tribunal, Mumbai Bench, in Marubeni Corporation v/s DCIT, [2014] 44 Taxmann.com 22 (Mum.), where the Bench held as under:-
"16. We have heard both the parties and their contentions have carefully been considered. The decision relied upon by the Ld. DR is not applicable to the present case as the provisions considered in the said decision are different from the provisions applicable to the present case. The Co- ordinate Bench of the Tribunal, in assessee's own case has already adjudicated this issue in respect of assessment year 2007-08. As a matter of precedent, the Tribunal is bound to follow the decision rendered by the Tribunal in the case of the assessee in earlier year, unless there is a change in law, change in the facts and circumstances of the case; and the same is contrary to the decision rendered by the Jurisdictional High Court or Apex Court. In absence of any of such circumstances, the earlier decision of the Tribunal in assessee's own case has to be applied. Accordingly, we decided the issue raised in the present appeal in favour of the assessee. The relevant observations of the Tribunal from earlier order have already been reproduced in the above appeal of this order.In view of above discussion, Ground No. 1 is allowed."9
Islamic Republic of Iran Shipping Lines
9. In the present case, the Department has not brought to our notice either any change in law or change in facts and circumstances which was considered by the Tribunal while deciding the issue in assessee's favour in assessment year 2007-08. As per the ratio laid down by the Co-ordinate bench of the Tribunal in Marubeni Corporation (supra), the Tribunal's decision in assessee's own case being a binding precedent has to be followed / applied. Moreover, in case of Mitchell Drilling International Pvt. Ltd. (supra), the Hon'ble Delhi High Court agreeing with the view expressed by Hon'ble Uttarakhand High Court in Schlumberger Asia Services Ltd., (supra) and referring to CBDT Circular no.4 of 2008 dated 28th April 2008, held that service tax collected by assessee on behalf of Government having no profit element cannot be included in gross receipt for computing income under section 44BB. Therefore, following the ratio laid down by the Hon'ble Delhi High Court in Mitchell Drilling International Pvt. Ltd. (supra), in the context of provisions contained under section 44BB, which is pari materia to section 44B and the decision of the Tribunal in assessee's own case for assessment year 2007-08, we hold that service tax collected by the assessee and paid to the Government account having no profit element cannot be 10 Islamic Republic of Iran Shipping Lines included in the gross receipts for computation of income under section 44B of the Act. Accordingly, while confirming the order of the learned Commissioner (Appeals) for assessment year 2009-10, we set aside the order passed by the learned Commissioner (Appeals) for assessment year 2010-11 by allowing assessee's claim. Grounds raised by the Department in ITA no.5409/Mum./2014, for the assessment year 2009-10, are dismissed whereas grounds no.1 to 4 as raised by the assessee in ITA no.4877/Mum./2014, for assessment year 2010-11 are allowed.
10. Assessee has raised one more ground in its appeal for assessment year 2010-11 being ground no.5, which reads as under:-
"5. On the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) erred in not granting credit for advance tax paid to the time of ` 1,51,12,269. Further, the learned CIT(A) has erred in not adjudicating this ground of appeal."
11. Learned Counsel for the assessee submitted before us, though, the assessee had raised a specific ground before the learned Commissioner (Appeals) in this regard, he failed to decide the issue. He also submitted, that even the assessee has filed an application 11 Islamic Republic of Iran Shipping Lines under section 154 of the Act before the Assessing Officer which is still pending.
12. Having considered the submissions of the parties, we direct the Assessing Officer to look into this aspect and decide the issue after verifying the details of income tax payment made by assessee.
13. In the result, assessee's appeal is partly allowed and Department's appeal is dismissed.
Order pronounced in the open Court on 17.02.2016 Sd/- Sd/-
ASHWANI TANEJA SAKTIJIT DEY
ACCOUNTANT MEMBER JUDICIAL MEMBER
MUMBAI, DATED: 17.02.2016
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
(Dy./Asstt. Registrar)
ITAT, Mumbai