Service tax shall not be included in gross receipts of a foreign airline for computing presumptive income

Case Details: Cathay Pacific Airways Ltd. v. ACIT - [2022] 142 taxmann.com 196 (Kolkata-Trib.)

Judiciary and Counsel Details

• • Sonjoy Sarma, Judicial Member & Girish Agrawal, Accountant Member
  • Amal Kamat, CIT DR for the Appellant.
  • J.P. Khaitan, Sr. Adv. & Pratyush Jhunjhunwala, Advs. for the Respondent.

Facts of the Case

Assessee, a non-resident airline company, filed its return of income reporting total income on the presumptive basis under section 44BBA. During the assessment proceeding, AO asked the assessee to explain the difference in gross receipts disclosed in the return of income and the service tax return. The assessee submitted the necessary details and explanations as required by the AO. After considering the assessee’s reply, it was found that the difference was due to service tax. The assessee had not included the service tax collected from customers in gross receipts for computing income under section 44BBA.

ITAT Held

In appeal, the Tribunal held that the expression “amount paid or payable” in section 44BBA(2)(a) and the expression “amount received or deemed to be received” in section 44BBA(2)(b) is qualified by the words “on account of the carriage of passengers, live stock material or goods from any place in India/outside India”. Therefore, only such amounts which are paid or payable for the service provided by the assessee can form part of the gross receipts for the purpose of computation of gross total income under section 44BBA(1).

Service tax collected by the assessee does not have any element of income. It is collected by the assessee from its customers for and on behalf of the Central Government on account of a statutory levy and, therefore, it does not form part of the receipts of the assessee on which income accrues or arises to it. Assessee merely acts as a collection agent for and on behalf of the Central Government and after collection, deposits the service tax so collected into the treasury of the Central Government. Hence, AO was directed to re-compute the income under section 44BBA by excluding the service tax component.