Associated Enterprises

[Pradeep Jain]

Dear Sir,

We have been provided design and Drawing by our Customer for manufacturing of Final product. Paying royalty thereon . At the time of year end we take provision of royalty payable . Service Tax is paid at the time of payment of Royalty .

Department view is that the said party is covered under Associated Enterprises as per section 92A of Income Tax . As associated Enterprises has the same meaning in ST as assigned in IT. Hence service tax is payable at the time of provision of service not at the time of payment.

Please give your kind advise.

Regards

Pradeep Jain

AI Summary

Debate on Timing of Service Tax for Royalties: Section 92A IT Act vs Rule 7 POTR 2011 Advice A discussion on a forum involves a query about the timing of service tax payments on royalties for design and drawing services provided by a customer. The customer is considered an associated enterprise under section 92A of the Income Tax Act. The department's view is that service tax should be paid at the time of provision, not payment. A respondent advises that according to rule 7 of POTR 2011, service tax should be paid at the time of payment. To avoid disputes, it is suggested that payments be made within three months.