Liability of Service Tax upon the noticee on the amount shown in profit & loss account as Liquidated damage and Debtor Written of.

[Sudhir Kumar]

The department has raised a demand on the income shown in profit & loss account as 'Liquidated Damage' and 'Debtor Written of' and now confirmed the same vide passing the Adjudicating Order. However, in defence reply various judicial pronouncement against the demand and in favour of the party on the above income was submitted by the party but department ignored all of them. Such income received as Liquidated Damage or Debtor Written of is not amounting to Sevice Tax liability.

AI Summary

Tax authority taxes liquidated damages and debtor write-offs; forum says no consideration - recommend departmental appeal or writ, note risks The tax authority assessed service tax on amounts recorded as liquidated damages and debtor write-offs and confirmed the demand in an adjudication despite the taxpayer citing favorable judicial precedents; forum respondents advise that such amounts lack the element of consideration and do not attract service tax. Recommended remedies include filing an appeal with required pre-deposit or seeking writ relief in high court, though one reply cautions that courts may require exhaustion of departmental remedies first. Forum consensus favors pursuing departmental appeal and CESTAT review while noting risks and potential delay of approaching the high court directly.