2017 (1) TMI 844 - AT - Service Tax

Place of provision of service - whether the service or training received by their employee, who have undergone Management Course at Columbia University, New York, by travelling and staying at New York for the said course during the period 2007-08 can be said to be a service rendered from outside India and received in India? Held that - under the provisions of Taxation of Service (provided from outside India and Received in India) Rules, 2006 read with Circular F.No.B1/4/2006-TRU, dated 19.04.2006, wherein Para 4.2.8, it have been clarified that specified taxable services, which involve physical performance, fall under Rule 3(ii) of the said Rules and the same are treated as services provided from outside India and received in India, if such services are partly or wholly performed in India - the service received by the employee of the assessee at New York, cannot be said to be service rendered from America or outside India and received by the assessee in India - demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues: Determination of whether services received by an employee undergoing a management course at Columbia University, New York, during 2007-08 can be considered as services rendered from outside India and received in India.

Analysis:
1. The appellant, a provider of taxable services, was issued a show-cause notice demanding Service Tax payment for a management course attended by their employee at Columbia University, New York. The Adjudicating Authority confirmed the demand, stating that the service falls under Commercial Training & Coaching, and although services by a foreign university are exempt, the appellant, being in India, is liable under Section 66A of the Finance Act. The appeal to the Ld. Commissioner (Appeal) was dismissed.

2. The appellant argued that the services were rendered and received by their employee in New York, outside the taxable territory, and thus not subject to the Finance Act provisions. They contended that the Adjudicating Authority erred in deeming the services received in India. The appellant also claimed that the demand was invalid due to proper recording in their accounts and that the extended limitation period did not apply.

3. After hearing both parties, the Tribunal considered that the services received in New York by the appellant's employee cannot be categorized as services rendered from America and received in India. Referring to the Taxation of Service Rules and Circular F.No.B1/4/2006-TRU, the Tribunal clarified that services involving physical performance are treated as provided from outside India and received in India if performed partly or wholly in India. In this case, as the service was not performed in India, the impugned order was set aside, and the appeal was allowed with consequential benefits.

This judgment highlights the importance of determining the location of service performance to ascertain tax liability under the Taxation of Service Rules. The Tribunal's decision clarifies that services provided outside India and not performed in India are not subject to Service Tax, even if received by an entity in India.