Presumptive income – Section 44BB – The servicetax is not an amount paid or payable, or received or deemed to be received by the assessee for the services rendered by it. The assessee is only collecting the service-tax for passing it on to the government. Thus, for the purpose of computing the presumptive income of the assessee u/s. 44BB, the service-tax collected by the assessee on the amount paid for rendering services is not to be included in the gross receipt in terms of section 44BB(2) rea<

The High Court of Delhi framed following question of law:

“Whether the amount of service-tax collected by assessee from its various clients should have been included in gross receipts while computing its income u/s. 44BB?”

The High Court held as under:

“(i) Section 44BB introduces the concept of presumptive income and states that 10% credit of the amounts paid or payable or deemed to be received by the assessee on account of “the provision of services and facilities in connection with, or supply of plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oil in India” shall be deemed to be the profits and gains chargeable to tax. The purpose of this provision is to tax what can be legitimately considered as income of the assessee earned from its business and profession.

(ii) The service-tax is not an amount paid or payable, or received or deemed to be received by the assessee for the services rendered by it. The assessee is only collecting the service-tax for passing it on to the government.

(iii) The position has been made explicit by the CBDT itself in two of its circulars. In Circular No. 4/2008 dated 28th April, 2008 it was clarified that “service tax paid by the tenant does not 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 TDS u/s. 194-I 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 technical services and no TDS is required to be made on the service-tax component u/s. 194J.

(iv) Thus, for the purpose of computing the presumptive income of the assessee u/s. 44BB, the service-tax collected by the assessee on the amount paid for rendering services is not to be included in the gross receipt in terms of section 44BB(2) read with section 44BB(1).”