Service Tax

NO, SERVICE TAX IS TO BE PAID ON PF AND ESI

SORRY , ITS

NO SERVICE TAX IS TO BE PAID ON PF AND ESI

In my opinion it should not be chargeable to Service Tax as it is the mandatory contributions recovered by the Man power suppliers .Of course many manpower suppliers are working under the coercion and the dictatorship of the HRD section of the industrial companies who instead of chosing to deposit  their mandatory contributions on the element of actual wages paid by the manpower provider , they ask to raise the bill and insist the payment of their contribution to be deposited by the concerned service provider. Moreover, some companies may opt to show dummy manpower suppliers who R one from their employees only . This tactics may be to get rid of permanent headache of  recurring liablities like Gratuity, Bonus as well as to curb the formation of Trade Unions. Of course the industries at large depending on their doemstic and export ratio and forcast of availability and utilisation of the Cenvat also make the contractors for raising the bills as Job work and insist them not to charge service tax being not covered under the Section 65 (19).       The govt. sh'd think to exempt the service tax on this activity and / or sh'd restrict the availment of cenvat on this input service  as it will curb  the availment of cenvat and ultimately it shall become revenue neutral being  compensated by more revenue collection as the manufacturers / giant service recipients  will have to make the payment to tax from P.L.A. ( in cash)

A Film Distributor engaged in Buying Film with ltd. copy rights say for the period of 3 years for the specified territory and engaged in the business since 2006 entering into agreement with the producer to recoup the Minimum Guarantee price paid and after recoupment of the MIn. Guaranteed Price also  to pay the share of profit  earned on the film. Does the Film Distribution activity was in the ambit of Ch.V ofthe Finance Act,1994 ( as amended) before amendment the Finance Act,2010. Whether this activity could be treated as Film Sale or The Business Support services ?       

Hi Noel,

Salaries and other benefits of employees recovered from clients is not liable to Service Tax.

Case Law

Magnum International Vs Commissioner- 2006(4) S.T.R.299(Tri-Del)

Regards

Prasad G.K

9980757272

Hi Ladda D S

Typical types of arrangements normally entered between a theatre owner and a distributor are as under;

a)      Under one type of arrangement, the distributor leases out the hall for screening of the movie. Here, the theatre owner gets a fixed rent from  the distributor. The profit or loss from exhibiting the film is borne by the distributor. In such a case, the theatre owner provides the taxable service of Renting of Immovable property for furtherance of business or commerce and is accordingly liable to pay service tax.

b)      Another type of arrangement is where the contract between the theatre owner and the distributor is on revenue sharing basis i.e a fixed and pre-determined portion i.e. percentage of revenue  earned from selling the tickets goes to the theatre owner and the balance goes to the distributor.  In this case, the two contracting parties act on principal-to-principal basis and one does not provide service to another. Hence, in such an arrangement the activities are not covered under service tax.

In the instant case the theatre owner screen/exhibits a movie that has been provided by the distributor. Such an exhibition is not a support or assistance activity but is an activity on its own accord. That being the case such an activity cannot fall under Business Support Service

Regards

Prasad G K

9980757272

Does anyone has following SC  judgment  relating to S Tax on rented premises

Home Solution Retail Ltd. V/s. Union of India 

Hi Amit Minocha , Please refer the following judgment of Hon'ble High Court Delhi and another of Hon'ble High Court,Bombay  

2010(05)LCX0023
IN THE HIGH COURT OF DELHI
Badar Durrez Ahmed and V.K. Jain, JJ.
Home Solution Retail India Ltd.
Versus
Union of India
W.P.(C) No. 3398 of 2010 and CM. Nos. 6827-6829 of 2010, decided on 18-5-2010

Cases Quoted -
Home Solutions Retail India Ltd. v. Union of India - 2009(04)LCX0003 Eq 2009 (014) STR 0433 (Del.) = 2009(04)LCX0003 Eq 2009 (237) ELT 0209 (Del.) - Referred [Paras 3,5]

Union of India v. Home Solutions Retail India Ltd. - 2009 (015) STR 0123 (S.C.) - Noted [Para 4]
Advocated By -
S/Shri A.M. Singhvi, Sr. Advocate with Rishi Ag-garwala, Amit Naik, Nakul Mohta and Pankaj Patel, for the Petitioner.
S/Shri H.C. Bhatia with Pratap Singh Parmar and Sumit Batrafor Mukesh Anand, for the Respondent.
[Order]. -
CM Nos. 6828-682912010 : Allowed subject to all just exceptions.

WP(C) 339812010 and CM 682712010

2. In this writ petition there is a challenge to Section 65(105)(zzzz) of the Finance Act, 1994 inasmuch as it purports to levy service tax on the renting of immovable property to be used for commercial/business purposes. This provision has been recently amended by the Finance Act, 2010 with retrospective effect from 1-6-2007.

3. Earlier also, this provision was the subject matter of consideration of this Court in the case of the very same petitioner and certain others, in WP(C) No. 1659/2008 and other petitions, decided by a Division Bench of this Court on 18-4-2009 [2009(04)LCX0003 Eq 2009 (014) STR 0433 (Del.) = 2009(04)LCX0003 Eq 2009 (237) ELT 0209 (Del.)]. In that decision, this Court, inter alia, had taken the view that Service tax is a tax on value addition provided by the service provider and that there must be a connection with the service and some value addition by that service. If there is no value addition, then there is no service. This Court also took the view that real estate by itself cannot by any stretch of imagination be regarded as a service. This Court also held that insofar as renting of immovable property for use in the course or furtherance of business or commerce is concerned, no value addition is discernible. It was consequently observed that the renting of immovable property for such purposes by itself did not entail any value addition and, therefore, cannot be regarded as a service. This Court, however, observed that in case there is some other service, such as air conditioning service provided along with the renting of immovable property, then it would fall within Section 65(105)(zzzz). This Court also observed as under :-

"In view of the foregoing discussion, we hold that Section 65(105)(zzzz) does not in terms entail that the renting out of immovable property for use in the course or furtherance of business of commerce would by itself constitute a taxable service and be exigible to service tax under the said Act. The obvious consequence of this finding is that the interpretation placed by the impugned notification and circular on the said provision is not correct. Consequently, the same are ultra vires the said Act and to the extent that they authorize the levy of service tax on renting of immovable property per se, they are set aside."

4. It is perhaps as a consequence of this decision, which is the subject matter of an appeal before the Supreme Court in which no stay has been granted [2009 (015) STR J23 (S.C.)], that the present amendment has been introduced to Section 65(105)(zzzz) by virtue of the Finance Act, 2010 and in particular to Section 76 thereof. The said Finance Act, 2010 received the assent of the President on 11-5-2010 (sic) and the aforesaid provision has been introduced with retrospective effect from 1-6-2007. The amendment that has been introduced by virtue of the Finance Act, 2010 is that in place of the words "in relation to renting of immovable property" appearing in Section 65(105)(zzzz), the following words have been substituted :-

"by renting of immovable property or any other service in relation to such renting".

5. Dr Singhvi, the learned senior counsel who appears on behalf of the petitioner, states that the amendment sought to be introduced, puts the petitioner in a worse position than the original provision which has already held not to have any element of service so as to be exigible to service tax. Prima facie, it appears that renting of immovable property itself has been regarded as a service by virtue of the recent amendment even though this Court by virtue of the said decision on 18-4-2009 had categorically concluded that renting of immovable property by itself cannot be regarded as a service. Issue notice. Notice is accepted by the counsel appearing on behalf of the respondent Nos. 1 and 3 and the counsel appearing on behalf of the respondent Nos. 2 and 4. Notice shall issue to respondents 5-10.

6. The respondents shall file the counter-affidavits within four weeks and the petitioner shall file the rejoinder/affidavits thereto within two weeks thereafter. In the meanwhile, there shall be no recovery of service tax from the petitioner in respect of renting of immovable property alone. No such service tax would also be recovered from respondents 5-10 in the meanwhile. It is made clear that in the event the writ petition is dismissed, the liability to pay service tax along with any other liability as a result of the demand made, will solely be that of the petitioner. We make it clear that there is no challenge in this writ petition to the second part of the aforesaid provision, namely, "any other service in relation to such renting" and consequently, if there is any other such service, the service provider would be liable to pay service tax on such service and in respect of this portion of the provision there is no stay.

7. Renotify on 21-9-2010.

8. Dasti.

Equivalent 2010 (019) STR 0003 (Del.)

*******************************

2010(05)LCX0023

IN THE HIGH COURT OF DELHI

Badar Durrez Ahmed and V.K. Jain, JJ.

Home Solution Retail India Ltd.

Versus

Union of India

W.P.(C) No. 3398 of 2010 and CM. Nos. 6827-6829 of 2010, decided on 18-5-2010

Cases Quoted -

Home Solutions Retail India Ltd. v. Union of India - 2009(04)LCX0003 Eq 2009 (014) STR 0433 (Del.) = 2009(04)LCX0003 Eq 2009 (237) ELT 0209 (Del.) - Referred [Paras 3,5]

Union of India v. Home Solutions Retail India Ltd. - 2009 (015) STR 0123 (S.C.) - Noted [Para 4]

Advocated By -

S/Shri A.M. Singhvi, Sr. Advocate with Rishi Ag-garwala, Amit Naik, Nakul Mohta and Pankaj Patel, for the Petitioner.

S/Shri H.C. Bhatia with Pratap Singh Parmar and Sumit Batrafor Mukesh Anand, for the Respondent.

[Order]. -

CM Nos. 6828-682912010 : Allowed subject to all just exceptions.

WP(C) 339812010 and CM 682712010

2. In this writ petition there is a challenge to Section 65(105)(zzzz) of the Finance Act, 1994 inasmuch as it purports to levy service tax on the renting of immovable property to be used for commercial/business purposes. This provision has been recently amended by the Finance Act, 2010 with retrospective effect from 1-6-2007.

3. Earlier also, this provision was the subject matter of consideration of this Court in the case of the very same petitioner and certain others, in WP(C) No. 1659/2008 and other petitions, decided by a Division Bench of this Court on 18-4-2009 [2009(04)LCX0003 Eq 2009 (014) STR 0433 (Del.) = 2009(04)LCX0003 Eq 2009 (237) ELT 0209 (Del.)]. In that decision, this Court, inter alia, had taken the view that Service tax is a tax on value addition provided by the service provider and that there must be a connection with the service and some value addition by that service. If there is no value addition, then there is no service. This Court also took the view that real estate by itself cannot by any stretch of imagination be regarded as a service. This Court also held that insofar as renting of immovable property for use in the course or furtherance of business or commerce is concerned, no value addition is discernible. It was consequently observed that the renting of immovable property for such purposes by itself did not entail any value addition and, therefore, cannot be regarded as a service. This Court, however, observed that in case there is some other service, such as air conditioning service provided along with the renting of immovable property, then it would fall within Section 65(105)(zzzz). This Court also observed as under :-

"In view of the foregoing discussion, we hold that Section 65(105)(zzzz) does not in terms entail that the renting out of immovable property for use in the course or furtherance of business of commerce would by itself constitute a taxable service and be exigible to service tax under the said Act. The obvious consequence of this finding is that the interpretation placed by the impugned notification and circular on the said provision is not correct. Consequently, the same are ultra vires the said Act and to the extent that they authorize the levy of service tax on renting of immovable property per se, they are set aside."

4. It is perhaps as a consequence of this decision, which is the subject matter of an appeal before the Supreme Court in which no stay has been granted [2009 (015) STR J23 (S.C.)], that the present amendment has been introduced to Section 65(105)(zzzz) by virtue of the Finance Act, 2010 and in particular to Section 76 thereof. The said Finance Act, 2010 received the assent of the President on 11-5-2010 (sic) and the aforesaid provision has been introduced with retrospective effect from 1-6-2007. The amendment that has been introduced by virtue of the Finance Act, 2010 is that in place of the words "in relation to renting of immovable property" appearing in Section 65(105)(zzzz), the following words have been substituted :-

"by renting of immovable property or any other service in relation to such renting".

5. Dr Singhvi, the learned senior counsel who appears on behalf of the petitioner, states that the amendment sought to be introduced, puts the petitioner in a worse position than the original provision which has already held not to have any element of service so as to be exigible to service tax. Prima facie, it appears that renting of immovable property itself has been regarded as a service by virtue of the recent amendment even though this Court by virtue of the said decision on 18-4-2009 had categorically concluded that renting of immovable property by itself cannot be regarded as a service. Issue notice. Notice is accepted by the counsel appearing on behalf of the respondent Nos. 1 and 3 and the counsel appearing on behalf of the respondent Nos. 2 and 4. Notice shall issue to respondents 5-10.

6. The respondents shall file the counter-affidavits within four weeks and the petitioner shall file the rejoinder/affidavits thereto within two weeks thereafter. In the meanwhile, there shall be no recovery of service tax from the petitioner in respect of renting of immovable property alone. No such service tax would also be recovered from respondents 5-10 in the meanwhile. It is made clear that in the event the writ petition is dismissed, the liability to pay service tax along with any other liability as a result of the demand made, will solely be that of the petitioner. We make it clear that there is no challenge in this writ petition to the second part of the aforesaid provision, namely, "any other service in relation to such renting" and consequently, if there is any other such service, the service provider would be liable to pay service tax on such service and in respect of this portion of the provision there is no stay.

7. Renotify on 21-9-2010.

8. Dasti.

Equivalent 2010 (019) STR 0003 (Del.)

thanks Mr Ladda