2007 (6) TMI 43 - AT - Service Tax

Valuation (Service tax) - Revenue contended that donation and government grants received by appellant should also form part of the assessable value for levy of service tax - Held that revenue contention was not correct and set aside

Summary

Issues:
Service Tax on donations and government grants collected by appellants for renting out their auditorium.

Analysis:

1. Background:
The case involves the computation of Service Tax on donations and government grants collected by the appellants for renting out their auditorium. The appellants argue that these collections are independent of the rents received and should not be included in the assessable value for the levy of Service Tax.

2. Appellants' Contention:
The appellants are registered under the Travancore Cochin Literary Scientific and Charitable Societies Registration Act, 1955. They engage in various social work activities and receive donations from the public for conducting these activities. The donations are voluntary and have no connection with the rents collected from customers renting the premises. The revenue authorities, however, insist that donations and government grants should be included in the assessable value for Service Tax.

3. Judicial Review:
The Tribunal considered the submissions from both sides. The appellants referred to a judgment of the Bombay High Court where similar charges were excluded from the valuation of taxable services for Service Tax purposes.

4. Revenue's Argument:
The revenue argued that donations were collected in the form of rent. However, upon inquiry, no admission was found from the appellants or the donors that the donations were related to the rental charges.

5. Tribunal's Decision:
After reviewing the Order-in-Original and the admissions made by various entities, the Tribunal found that the donations were voluntary and unrelated to the services availed by the clients. The donations were meant for cultural activities conducted by the society, independent of the rental services. Therefore, the Tribunal ruled in favor of the appellants, excluding donations and government grants from the assessable value for Service Tax. The matter was remanded back to the Original Authority for recomputation of Service Tax, with a directive to decide the issue within two months.

6. Conclusion:
The Tribunal allowed the appeal, directing the exclusion of donations and government grants from the calculation of Service Tax. The decision emphasized the voluntary nature of the donations and their independence from the rental services provided by the appellants.

This detailed analysis of the judgment highlights the key arguments, judicial review, and the final decision of the Appellate Tribunal regarding the computation of Service Tax on donations and government grants collected by the appellants.