Reimbursement of service tax, by ONGC to assessee not a part of aggregate amount specified in sub-section (2) of section 44BB

  • Vide Decision of High Court Of Uttarakhand in Director of Income-tax International Taxation v.Schlumberger Asia Services Ltd.

Facts of the case:

  1. Section 44BB of Income Tax Act, 1961 provides that in case of an assessee engaged in the business of providing services or facilities in connection with, or supplying plant and

machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils, a sum equal to 10% of the aggregate of

(a) the amount paid or payable the assessee or to any person on his behalf 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 oils in India;

(b) the amount received or deemed to be received in India by or on behalf of the assessee on account of the provision of services facilities 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 oils outside India.

shall be deemed to be the profits and gains of such business chargeable to tax.

  • The issue involved in the present case is whether or not reimbursement of service tax, by the ONGC to the assessee forms a part of the aggregate amount specified in sub-section (2) of Section 44BB.
  • Department contended that the phrase used in Section 44BB (2) is “on account of” which is of a wider connotation and includes service tax, reimbursement of service tax along with consideration.
  • Assessee contended that the service tax collected/received by the assessee from its customers is on account of provision of services to be deposited with the Government of India. Since reimbursement of service tax is not on account of services rendered but is on account of ‘provision of services and facilities’ and is a statutory duty imposed on the assessee, it does not fall within the meaning of “amount” under Section 44BB(1). Also, such an amount is of the nature of ‘pure reimbursement’ without having an income element.

Judgement: The Honorable Supreme Court of India held that the amount reimbursed to the assessee by the ONGC, representing the service tax paid earlier by the assessee to the Government of India, would not form part of the amounts referred to in Section 44BB as the reimbursement of service tax is not an amount paid to the assessee on account of providing services and facilities in connection with the prospecting for, or extraction or production of, mineral oils in India.

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