Stipend reimbursement without commercial quid pro quo falls outside taxable value for commercial training and coaching services.

Reimbursement of statutory apprentice stipends was not consideration for commercial training and coaching service where the Board reimbursed half the stipend without any mark-up. Taxability under the Finance Act, 1994 requires a service-provider and service-recipient relationship and commercial quid pro quo. The reimbursement was characterised as a welfare grant, with the appellant acting at most as a pure agent transmitting stipend amounts rather than providing a service to the Board. For the period before 14 May 2015, Section 67 did not allow expenditure or costs to be included in taxable value unless they constituted consideration for the service. The service-tax demand, interest and penalty were therefore unsustainable.

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Issues: Whether reimbursement by the Board of Apprenticeship Training of 50% of stipends paid by the appellant to apprentices under a statutory training obligation constituted taxable consideration for commercial training and coaching service during April 2012 to December 2014.

Analysis: Taxability under the Finance Act, 1994 requires a service-provider and service-recipient relationship founded on commercial consideration. The amount received was an uncontroverted reimbursement of half the statutory stipend paid to apprentices, without any mark-up, and was in the nature of a welfare grant rather than a charge for a service rendered to the Board. The appellant was, at most, a pure agent transmitting the reimbursed stipend. Before the amendment effective from 14 May 2015, Section 67 did not permit inclusion of expenditure or costs incurred in providing a service where they were not consideration paid as quid pro quo for that service.

Conclusion: The stipend reimbursement was not taxable consideration and could not be included in the taxable value for the disputed period; the service-tax demand, interest and penalty were unsustainable.

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