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of <h1>Training service providers can exclude reimbursements as pure agent expenses under Rule 5 before May 2015</h1> <h3>Ahmedabad Management Association Versus Commissioner of S.T. -Service Tax – Ahmedabad</h3> Ahmedabad Management Association Versus Commissioner of S.T. -Service Tax – Ahmedabad - TMI Issues Involved:1. Whether the reimbursements received by the appellant are includable in the assessable value for service tax purposes.2. Whether the grants-in-aid received by the appellant constitute consideration for taxable services.Issue-Wise Detailed Analysis:1. Inclusion of Reimbursements in Assessable Value:The primary issue was whether reimbursements received by the appellant for expenses such as hotel accommodation, dinner charges, local transportation, program folders, and stationary charges should be included in the assessable value for service tax purposes. The appellant argued that these reimbursements were made in the capacity of a pure agent, and thus, should not be included in the assessable value as per Rule 5 of the Service Tax (Determination and Valuation) Rules, 2006. The appellant relied on the Supreme Court's decision in Intercontinental Consultant Technocrats Pvt. Ltd., which held that reimbursable expenses should not be included in the valuation of service under Section 67 of the Finance Act, 1994. The Tribunal, after considering the arguments, found merit in the appellant's contention, noting that the nature of expenses in this case was similar to those in the Intercontinental Consultants case, such as hotel stay and transportation, which were ruled not to be includable in the assessable value.2. Grants-in-Aid as Consideration for Taxable Services:The second issue was whether the grants-in-aid received by the appellant from the Government of Gujarat constituted consideration for taxable services. The appellant contended that these grants were not linked to any specific service provided to the government and thus did not constitute consideration for taxable services. The appellant supported this argument with various decisions, including Checkmate Services Pvt. Ltd. and Centre for Research & Industrial Staff Performance, which established that grants-in-aid used for implementing welfare schemes or charitable causes do not create a service provider-client relationship, and thus, are not subject to service tax. The Tribunal agreed with this position, noting that the grants-in-aid were not specifically meant for any particular service or trainee, but were for a general charitable cause. The Tribunal also referenced the clarification provided in Circular No. 127/9/2010-ST, which stated that donations and grants-in-aid not linked to specific services should not be treated as consideration for service tax purposes. Consequently, the Tribunal concluded that the grants-in-aid received by the appellant did not constitute consideration for any taxable service.Conclusion:The Tribunal set aside the impugned order, holding that neither the reimbursements nor the grants-in-aid received by the appellant were subject to service tax. This decision was based on the legal principle that reimbursable expenses incurred as a pure agent are not includable in the assessable value, and that grants-in-aid not linked to specific services do not constitute taxable consideration. The appeals were allowed in favor of the appellant, and the demand for service tax was quashed.
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