TaxTMI 
TaxTMI 
2026 (2) TMI 282
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....nt Venture viz. M/s.Baaskaar IT Technologies SA Ltd., Quatar LLC (JV, for short) would raise debit notes on the Assessee as "Consultant pay rolls" every month which was duly reflected in the Assessee's books as "Consultant Charges" and as "Purchase of Service" in their related party disclosures in the Balance Sheet. This was understood to be "Information Technology Service" rendered by the Assessee to its clients abroad by availing support of their subsidiary units abroad which is covered under 'Business Support Service' (BSS) as defined under Section 65 (105) (zzzq) of the Finance Act, 1944 - for the period upto 30.06.2012. It was the case of the Revenue that the Assessee had thus received services from the person located in a non-taxable territory, they had not paid services on the same under 'BSS' and 'ITSS' upto 30.06.2012 and as a 'taxable service' under Section 65B (44) of the Finance Act, 1994 w.e.f. 01.07.2012, since the Assessee was alleged to be exporting 'ITSS' to its JV company located in Middle East countries by issuing export invoices addressed to their subsidiaries, who in turn would raise invoices on the end-customers. The subsidiaries abroad would deduct the expens....
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....the non-taxable territory is nothing but the operational or administrative assistance extended to the Assessee with the help of the locally employed personnel and of the consultants. ⮚ The vital point is that the amount payable under reverse charge is the liability paid on behalf of the Foreign Service provider (JV), as the Assessee is not an output service provider. ⮚ Service Tax on Information Technology Service to his clients abroad is leviable on the basis of the location of the recipient in taxable territory [Rule 3(iii) of Taxation of Services (Provided from outside India and received in India) Rules,2006 till 30.06.2012, and thereafter in terms of Rule 3 of the Place of Provision of Service Rules 2012 (POPS)]. Services received from outside India are chargeable to Service Tax as per Section 66A of the Finance Act 1994 read with Rule 3 (iii) of Taxation of Services (Provided from outside India and received in India) Rules, 2006 till 30.06.2012, and thereafter in terms of Section 66C of the Act ibid read with Rule 3 of the Place of Provision of Service Rules 2012. Since M/s Kaar Technologies India Ltd. being recipient of taxable service in India....
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....anies incorporated locally or local business entities. The local entities/companies can sub-contract the work to a third party. 2. The Respondent-Company has incorporated companies in different countries to execute work in those countries. These companies receive the work orders from the foreign entity and they in turn outsource a portion of the work to the Respondent. 3. The JV has deployed local employees for performing business as required under local rules. They incur expenditure towards salaries/wages and other allowances paid to the employees and consultancy charges to local consultants / agencies, medical insurance, travel expenses etc., for which the JV raises a debit note and they have not rendered any services to the Respondent. 4. The entire activity takes place in the non-taxable territory. The services are rendered by the JV in non- taxable territory to a customer, located in a non-taxable territory. The Respondent is raising an export invoice on JV and those entities are raising an invoice on the end-customer. 5. JV was created only for the purpose of conducting business and the SCN itself acknowledges the company as a pass-through ....
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....n-taxable territory is defined under Section 65B (35) to mean the territory which is outside the taxable territory. 12. As per Notification No.25/2012, services received from a provider of service located in a non-taxable territory by a person located in a non-taxable territory is exempted. The relevant portion is extracted below: "34. Services received from a provider of service located in a non-taxable territory by- (a) ........... (b) ........... (c ) a person located in a non-taxable territory; .... ..." 13. In terms of Section 68 (2) read with Notification No.30/2012 dated 20.06.2012 service tax is payable by the recipient if any taxable services are agreed to be provided by any person located in a non-taxable territory and is received by any person located in the taxable territory. 14. A reading of Explanation 3 to Section 65B (44) read with Entry 34 to Exemption Notification No.25/2012 dated 01.07.2012 indicates the following: (a) Establishments in taxable territory and non-taxable territory have to be treated as establishments of distinct persons. (b) A service provided in a non-....
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....C) for the proposition that reimbursements are not taxable. Further, except the accounting Entry nothing has happened in the taxable territory. 10. Further, it was also submitted by the Ld. Advocate that the demands proposed in the SCN for the period prior to 01.07.2012 was also not sustainable as the JV was not providing any service to the Assessee-Respondent, which was only outsourced services to the Respondent which would only amount to "export of service". Moreover, the expenses incurred by the JV having been paid in local currency which was reduced from the payment to the Respondent-Company, no payment being made from India, there is no service provider and receiver relationship between the two entities and the entire activity happened in a non-taxable territory and therefore the presumption that the JV was rendering support service to the Respondent has been negatived by the Commissioner which is in order. 11. For the period post-01.07.2012, it was submitted that because Section 66C of the Place of Provision of Rules, (POPS) 2012 determines the liability to pay service tax, Rule 3 of the Place of Provision of Service Rules provides that services shall be deemed to be pr....
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....plained as those services which are in the nature of support activities for the ongoing business support functions. These services are distinct from operational assistance for marketing which was covered earlier under the scope of taxable services, for the limited purpose of understanding and for coming to a conclusion about the date of effect of bringing into tax net the scope of comprehensive services of 'operational or administrative assistance', such expansion of services were brought under the tax net only with effect from 01.05.2011 and not earlier, as contended by the Revenue; the Appeal filed by Revenue for charge of service tax on the disputed activity, prior to 01.05.2011 therefore does not have the support of law. 16. Further, post-01.07.2012, services were interpreted to refer any activity carried out by a person for another for consideration, including certain services which is a 'declared service', provided these services are not covered by certain exclusion provided therein under Section 65B (44) ibid. Hence, it is clear that the nature of services provided to the Respondent should fall in the scope of 'support services of business or commerce, prior t....
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.... the categorical decision of the Tribunal, the issue under dispute in the present case is no more open to debate, and a different view cannot be taken by this Tribunal. The relevant paragraphs of order of the Tribunal in the case of Tech Mahindra Ltd., Milind Kulkarni (supra) is extracted and given below: '... 16. Section 66A of Finance Act, 1994 taxes all taxable services received by a person who 'has his place of business, fixed establishment, permanent address or usual place of residence in India' from 'a person who has established or has a fixed establishment from which the service is provided or to be provided or has his permanent address or usual place of residence, in a country other than India' Revenue has alleged that Explanation 1 in subsection (2) having designated branches as business establishment overseas and Section 66(2) mandating that - (2) Where a person is carrying on a business through a permanent establishment in India and through another permanent establishment in a country other than India, such permanent establishments shall be treated as separate persons for the purposes of this section tax liability devol....
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....s draw upon Section 93 of Finance Act, 1994 in a manner akin to Export of Service Rules, 2005. It is noticed that the Taxation of Services (Provided from Outside India and Received in India) Rules, 2005 also mirrors the Export of Service Rules, 2005. That, however, cannot be taken as intent to tax the inflow of service merely because of a corresponding exemption accorded to the outflow of services. Reference to Section 93 as an authority for prescribing the Rules would make it appear that the purpose of the said two sets Rules is to exclude from tax such services that do not fall within the three classifications predicating the import of service. The residuary provision in the Rules of 2006 make it clearly that such services have to be received by a recipient located in India for use in relation to business or commerce. The provisions of the successor Rules are no different. 23. The catena of judgments cited for both sides, viz., British Airways v. Commissioner of Central Excise (Adjn) [2014-TIOL-979-CESTAT-Del = 2014 36) S.T.R. 598 (Tri.-Del.)], Torrent Pharmaceuticals Ltd. v. Commissioner of Service Tax [2015 (39) S.T.R. 97 (Tri.-Ahmd.)] and Infosys Ltd. v. Commissioner ....