GST Not Includible in Presumptive Income Under Section 44B for Shipping Company: ITAT Mumbai

The Income Tax Appellate Tribunal (ITAT), Mumbai has ruled in favour of a shipping company, holding that Goods and Services Tax (GST) collected by it cannot be added to gross receipts for calculating presumptive income under Section 44B of the Income Tax Act.

The assessee, Orient Overseas Container Line Limited, approached the ITAT challenging various issues like consideration of GST while calculating presumptive income under section 44B of the Act, incorrect computation of book profits under section 115JB, Short grant of credit of TDS and advance tax, Non-grant of interest under Section 244A, and Initiation of penalty proceedings under section 270A.

The assessee had collected GST towards ancillary charges, but the same was not included while calculating the presumptive income under section 44B of the Income Tax Act. Accordingly, the Assessing Officer (AO), during assessment, included GST of Rs 8,34,49,094 in gross receipts and made an addition of the same amount to the income of the assessee.

The Tribunal, relying on its own earlier decisions in the assessee’s case for multiple assessment years, including AYs 2020-21 and 2022-23, held that GST cannot be treated as “charges” related to the carriage of goods under Section 44B and the same cannot be included in the gross receipts while calculating presumptive income under section 44B of the Act.

The next issue was related to the applicability of provisions of Section 115JB of the Income Tax Act. The company argued that section 115JB was not applicable to it as per Explanation 4A to section 115JB(1). The Tribunal agreed that the provisions of Section 115JB are not applicable to the assessee in view of Explanation 4A to Section 115JB(1), as the assessee had paid tax under Section 44B read with Section 90(2) of the Income Tax Act and Article 8 of the India-Hong Kong Tax Treaty.

On the issues relating to the short grant of TDS and advance tax credit and the non-grant of interest under Section 244A, the Tribunal noted that these were already pending for verification by the AO. Therefore, it directed the AO to verify the facts and grant credit of TDS and advance tax and the interest under section 244 of the Income Tax Act. Additionally, the ground raised by the company regarding the penalty proceedings under section 270A of the Act was dismissed for being premature.