Reverse charge taxability of underwriting services depends on performance in India; overseas services were outside the charging ambit.

Underwriting services received from foreign entities were held taxable in India on reverse charge basis only where, under section 66A read with the 2006 Rules, the services were performed wholly or partly in India. Applying Rule 3(ii), the services linked to an overseas ADS offering were found not to have been performed in India at all, so they fell outside the charging ambit for reverse charge taxability. The demand and penalties were therefore unsustainable, and the impugned order was set aside with consequential relief.

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Issues: Whether underwriting services received from foreign entities were taxable in India on reverse charge basis under section 66A of the Finance Act, 1994 read with the Taxation of Services (Provided from Outside India and Received in India) Rules, 2006, where the services were not performed partly or wholly in India.

Analysis: Section 66A had to be read with the 2006 Rules for determining liability on services received from outside India. Under Rule 3(ii), underwriting services were taxable on reverse charge basis only if such services were performed in India, and even partial performance in India would suffice. The services in question were found to relate to an overseas ADS offering and were not performed in India, either wholly or partly. The service was therefore outside the charging ambit for reverse charge taxability.

Conclusion: The underwriting services were not taxable in India on reverse charge basis, and the demand with penalties could not be sustained.

Final Conclusion: The impugned order was set aside and the appeal was allowed with consequential relief.

Ratio Decidendi: For underwriting services falling under Rule 3(ii) of the 2006 Rules, reverse charge liability arises only when the services are performed wholly or partly in India.

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