ITAT Mumbai: GST Collected by Foreign Firm Not Part of Gross Receipts U/S 44BB

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) ruled that the GST collected by foreign companies is not included in Gross Receipts to calculate income under Section 44BB of the Income Tax Act, 1961.

The appellant, Oceaneering International GMBH, questions the inclusion of GST in the calculation of presumptive income under section 44BB of the Income Tax Act.

Oceaneering International GMBH, a non-resident company registered in Switzerland, specialises in furnishing equipment and services for oil and gas drilling operations to companies engaged in exploration activities in India.

The company for the AY 2021-22 has furnished its return, proposing the income to tax on a presumptive basis under section 44AB of the income tax law, proposing gross receipts of Rs 92.44 crores. After that, the return was chosen for scrutiny directing to a series of notices and data requests.

The main contentions that the taxpayer raised were that the final assessment order was restricted by limitation, claiming that the order passed dated October 25, 2024, was beyond the 12-month timeline from the end of the related AY 2021-22, which concluded on March 31, 2023.

The taxpayer argued that the inclusion of GST of Rs 13,10,09,191 in the gross receipts for the calculation of the income u/s 44BB(1) of the Act, claiming that the GST was collected in a fiduciary capacity and must not be included.

Read Also:- An Overview of New Amendments in IT Section 44AB

Initially, it was noted by the Income Tax Assessing Officer (AO) that the taxpayer had obtained the payments concerning GST, which were not comprised in the gross receipts proposed to tax u/s 44BB of the Income Tax legislation. From the Authority for Advance Ruling and Coordinate Delhi Benches, the AO directed the decision claiming that GST must form part of the gross receipts for presumptive taxation.

The taxpayer answering mentioned that it collected the GST on behalf of the government, acting only as a connection between the service receiver and the central government. The taxpayer relied on the earlier tribunal orders and directions of the Dispute Resolution Panel (DRP), which had not contained service tax in gross receipts.

The DRP validated the opinion of AO, quoting that Section 145A of the Income Tax Act needs GST to be included in the valuation of turnover for defining income leviable to tax. The DRP stressed that the amounts had been “paid” for qualified services and “received/receivable” by the taxpayer, as shown in bank statements.

The taxpayer in the hearing cited that GST is a regulatory imposition collected on behalf of the government and deposited into the treasury of the government with zero profit included. It said that the GST must not be regarded an amount filed or obtained for the services of the mineral oil extraction under section 44BB.

The taxpayer relied on the coordinate benches’ decisions, which ruled that GST cannot be regarded as part of the receipt of presumptive taxation u/s 44B of the Act.

The two member bench of Amit Shukla and Vikram Singh Yadav, post hearing opinions and referring the rulings of the coordinate benches in the case of Seadrill International Ltd. V/S ACIT and Orient Overseas Container Line Limited V/S DCIT, it was held that “GST would not form part of gross receipts for the purposes of computing income under Section 44BB of the Act and the AO is hereby directed to exclude the amount of Rs 13,10,09,191/- towards GST while computing gross receipts in hands of the assessee.”