Liability of service tax

[paresh zatakia]

Dear Colleagues Mr.A,Mr.B,Mr.C,& Mr.D entered into a joint venture for a setting up an I.T.Park. Mr.C,& Mr.D prematuredly rertired from the J/V.At the time of retirement Mr.A,Mr.B paid lumpsum consideration of Rs.50 lacs to Mr.C.They mentioned that amount included amount payable to Mr.D. Mr.C paid Rs.20 lacs to Mr.D towards his share in retirement consideration of Rs.50 lacs.There is written document which mentions this fact.But Mr.C while making payment deducted TDS Under Section 194J. Querry Mr. D has an apprehension that since TDS has been deducted,service tax may be leviable. Infact the amount he received is towards his share in retirement consideration of the Rs.50 lacs. Is Mr.D liable to pay service tax on Rs.20 lacs he received towards his share in retirement consideration of the Rs.50 lacs ? Regards c.a.paresh Zatakia

[Guest]

I think the action of Mr. C is totally wrong. He has received an amount of Rs. 50 lakhs as lump sum including the share of Mr. D. This facts is in writing, thus the amount received by Mr. C is in the capacity of agent only. An agent who receives an amount on behalf of any other person, is not supposed to deduct TDS when he is remitting the same to such other person. Moreover, the amount paid by Mr. C to Mr. D is not in the nature of fee for professional or technical services. Therefore, the action of Mr. C is totally unjustifiable.

[paresh zatakia]

Dear Sir, My querry is wheether service tax is applicable or not? regards paresh zatakia

AI Summary

Service tax applicability on retirement consideration: agent receipts and TDS deduction do not convert such proceeds into taxable service. Whether service tax applies to amounts received by a retiring joint venture partner as a share of a lump sum retirement consideration: where one partner received the lump sum and remitted another partner's share, those amounts are characterised as distributive/agent receipts rather than payment for professional or technical services; withholding of tax at source by the intermediary does not by itself transform such distributive receipts into taxable service receipts.