2024 (8) TMI 154 - HC - Service Tax

Court Voids Service Tax Order on Legal Profession Income, Remands for Further Review on Non-Advocacy Earnings.

The HC set aside the impugned order demanding service tax on the petitioner's legal profession income, referencing a prior ruling that exempts such income ... Levy of service tax - income from profession of advocacy - HELD THAT:- The issue decided in the case of MR. PRASHANTH SREEDHAR SHENOI, V. RAGHURAMAN, ADVOCATE, SRI C.V. SUDHINDRA, SRI THURUNAS KRISHNACHARI SURESH, SHRI MANOHAR JEERIGE, SHRI MADHUSUDAN R. BIDI, VERSUS ASSISTANT COMMISSIONER OF CENTRAL TAX, BANGALORE, JOINT COMMISSIONER OF CENTRAL TAX BANGALORE, UNION OF INDIA, THE SUPERINTENDENT OF CENTRAL TAX, DSD-2 BENGALURU, THE PRINCIPAL CHIEF COMMISSIONER OF CENTRAL TAX BENGALURU [2024 (5) TMI 466 - KARNATAKA HIGH COURT] where it was held that 'individual lawyers and Partnership of firm of Advocates, Senior Advocates are exempted from payment of service tax under certain circumstances.' The impugned order is liable to be set aside - the matter is relegated to the stage of hearing after show cause notice - petition disposed off by way of remand. Issues Involved:Validity of the order raising a demand for taxable services other than those specified in the negative list in the Finance Act, 1994.Analysis:The petitioner, an advocate, challenges the validity of the order demanding service tax on income from the legal profession. The petitioner relies on a previous court order stating that income from advocacy cannot be subject to service tax. The respondent argues that while the legal question may seem settled based on the previous order, the specific case involves agricultural receipts that need consideration by the adjudicating authority.The court refers to observations from a previous case (W.P. No. 26096/2022) regarding service tax on legal services. It highlights that individual advocates or firms offering legal services are liable to pay service tax under specific rules and exemptions. Notably, the exemption notification exempts certain legal services from service tax, including those provided by individual advocates or firms to specific entities or below a certain turnover threshold.The court emphasizes that even where advocates or firms do not fall under the exemption, the recipient of the service is liable to pay service tax. For senior advocates providing representational services, the obligation to pay service tax rests with the recipient, not the senior advocate. The court concludes that individual lawyers, firms of advocates, and senior advocates are exempt from service tax under certain conditions.Based on the legal position established in the previous case, the court sets aside the impugned order raising a demand for service tax on income from the legal profession. The matter is remanded for further consideration after a show cause notice. The petitioner is allowed to provide a fresh reply regarding receipts other than from advocacy practice. The court clarifies that income from the legal profession should be excluded from service tax based on the previous observations.In conclusion, the petition is disposed of, and all contentions are left open for further consideration.