TaxTMI 
TaxTMI 
2025 (6) TMI 1167
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.... of the 'upfront fee' which was sought to be charged to tax as consideration for rendering of 'banking and financial services' as set out in section 65(105)(zm) of Finance Act, 1994. The appellant herein had resisted the proposal with the plea that the Asian Development Bank (ADB), owing to special provisions made by the Government of India, was immune from every sect of tax. 2. The original authority confirmed the demand on the ground that, in terms of section 66A of Finance Act, 1994 attendant upon absence of the provider of service within the territory of India, tax liability devolved on the recipient as deemed 'provider of service', which Commissioner of Service Tax (Appeals-I), Mumbai found, in order [ order-in-appeal no. PK/ST-I/MUM/79/2016-17 dated 31st January 2017 ] disposing off appeal to be valid law and on the admitted fact that such deductions had been made in a loan availed by the appellant herein. Learned Chartered Accountant for the appellant, while pointing out inaccuracies and incorrectness therein, the decision of the Tribunal, in Coastal Gujarat Power Ltd v. Commissioner of Service Tax, Mumbai - I [2016-TIOL-2925- CESTAT-MUM], which, though appealed against bef....
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....y to accord, in its territory, the status, immunities, exemptions and privileges set forth in the Agreement. 15. Under Article 253 of the Constitution, legislation is necessary to render the Agreement enforceable. With such legislation, the immunities acquire force of law that prevail over any other law, even if contrary. It has been held that there is a constitutional obligation to enact laws in pursuance of international agreements and it has also been held that, till such enactment occurs, the agreements remain as unenforceable intentions. Conversely, every law enacted to honour international agreements become binding on every authority in the country.' and '22. We would like to give some thought to the apparent difference in approach in so far as the immunity of the two service providers vis-à-vis the United Nations and its various bodies. On behalf of the appellant, it has been pointed out that, in section 8 of the Untied Nations (Privileges and Immunities) Act, 1947, the said body specifically denies to itself exemption from excise duties and taxes on sale of movable and immovable property. That could well be so. But we note that immunity Act pertaining to United ....
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....ances that general taxing provision, section 66, does not encompass. The mechanics of implementation of the special provision are embodies in the Rules that we have elaborately discussed supra. We have inferred that the tax is restricted to circumstances that do not admit to jurisdictional existence of the provider. A legislation that admits to status, privileges and immunity of providers within the territory of India stands on a better footing as having jurisdictional presence than administratively ascertained characteristics such as establishment and place of residence. Hence we conclude that the Asian Development Bank and International Finance Corporation do have an existence in India, even if not corporeally, by legislative acknowledgement. The services rendered by them are not de hors the provider as to require recourse to section 66A to be subject to taxation. It is section 66 that is to be invoked. 25. Taking this conclusion forward, we do not perceive the need for a separate exemption as the Agreement incorporated in the Schedule to the two Acts specifically provide that "The Bank shall also be immune from liability for the collection or payment of any duty or tax." a....
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....9;the power to legislate lies with Parliament under entries 10 and 14 of List I of Seventh Schedule. But making of law under that authority is necessary when the treaty or agreement restricts the right of citizens or others or modifies the laws of the state. If the rights of the citizens or others which are not justifiable are not affected, no legislative measure is needed.' With the two Acts in place, there can be no doubt that which will prevail. The decision in Kubic Dariusz vs. Union of India [1990 AIR 605] and Mackinnon Mackenzie v. Audrey D' Costa [(1987) 2 SCC 469] indicate the tendency to the alternate approach of harmony with international law as the cornerstone of administration when in conflict. In Jolly Verghese vs. Bank of Cochin [1980 SCR (2) 913], Justice VR Krishna Iyer speaking for the Bench laid out the constitutional framework thus: 'India is now a signatory to this Convenant and Art 51 (c) of the Constitution obligates the State to "foster respect for international law and treaty obligations in the dealings of organized peoples with one another". Even so, until the municipal law is changed to accommodate the Government what binds the court is the....