Service tax collected for the Government is not taxable as fees for technical services when remitted without profit element.

Service tax collected by the assessee and remitted to the Government was held not to be consideration for technical services and not part of receipts chargeable as fees for technical services under section 115A read with the treaty. The amount was treated as a statutory levy collected on behalf of the Government, with no profit element and no character of trading receipt or taxable income in the assessee's hands. A contrary sales-tax based argument was distinguished, and the assessee succeeded on the issue.

---

---

Issues: Whether service tax collected by the assessee from the recipient of services formed part of the receipts chargeable to tax as fees for technical services under section 115A of the Income-tax Act, 1961 read with the applicable treaty.

Analysis: The receipts in question represented service tax collected on behalf of the Government and remitted to it. Such amount was not consideration for the technical services rendered, did not bear any profit element, and was in the nature of reimbursement. Following the co-ordinate bench view that service tax collected and paid over to the Government cannot be treated as trading receipt or as part of fees for technical services, the amount could not be brought to tax in the hands of the assessee. The contrary reliance on the sales-tax decision was distinguished.

Conclusion: Service tax collected by the assessee did not form part of taxable receipts and could not be included in fees for technical services. The assessee succeeded on the issue.

Ratio Decidendi: Amounts collected purely as statutory levies on behalf of the Government, and remitted to it without any profit element, do not constitute taxable receipts or part of fees for technical services.

---