2018 (6) TMI 794 - AT - Service Tax

Real Estate Agent Service - the appellant has rendered non binding investment advisory service to its holding company - demand of service tax - Held that - Upon perusal of the Advisory Service Agreement, dated 10.03.2009 between the appellant and its holding company, i.e., IHM, it is seen that the appellant is required to render investment advisory services in connection with investment opportunities in India. It is clear that such services have been rendered relating to various companies engaged in the business of real estate - the demand of Service-Tax under Real Estate Agent Service is not justified. Manpower Recruitment or Supply Agency Service - reverse charge mechanism - employer-employee relationship - Department took the view that the amounts paid to the expatriates are to be considered as consideration for manpower supply and liable to Service-Tax, on reverse charge basis - Held that - Some of the payment letters issued by the appellant to the expatriates which make it clear that such expatriates will be employees of the appellant during the period of their assignments to the appellant. Further, the Income-Tax returns filed by the expatriates clearly shows the appellant as their employer and Income-Tax has also been paid for the amounts received by the expatriates in India, under the category of salary - there can be no levy of Service-Tax under the category of manpower supply since the expatriates were enjoying the employee-employer relationship with the appellant. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Service Tax liability under Real Estate Agent Services for providing investment advisory services to holding company.
2. Service Tax liability under Manpower Recruitment or Supply Agency Service for employing expatriates.

Issue 1: Service Tax liability under Real Estate Agent Services
The appellant, registered for providing various services including banking and financial services, was alleged to have rendered non-binding investment advisory services to its holding company. The Department claimed that these services fell under Real Estate Agent Service and demanded Service Tax on a reverse charge basis. The appellant argued that the services provided were advisory in nature, not specifically related to real estate, and therefore should not be classified as Real Estate Advisory Services. The Tribunal examined the Advisory Service Agreement and concluded that the services were not in relation to real estate but rather investment opportunities in various companies. Citing relevant case laws, the Tribunal ruled that the demand of Service Tax under Real Estate Agent Service was not justified and set it aside.

Issue 2: Service Tax liability under Manpower Recruitment or Supply Agency Service
The Department also demanded Service Tax under Manpower Recruitment or Supply Agency Service for the employment of expatriates provided by the holding company. The appellant contended that the expatriates were employees of the company during their assignment and had an employer-employee relationship with the appellant. Supporting documents such as the Employment Secondment Agreement and Income-Tax returns were presented to establish this relationship. The Tribunal examined the evidence and found that the expatriates indeed had an employee-employer relationship with the appellant. Consequently, the Tribunal held that there was no basis for levying Service Tax under the category of manpower supply and set aside the impugned order in its entirety, allowing the appeal.

In conclusion, the Tribunal ruled in favor of the appellant, setting aside the demand of Service Tax under both Real Estate Agent Services and Manpower Recruitment or Supply Agency Service. The judgment highlighted the importance of analyzing the nature of services provided and the relationships involved to determine the applicability of Service Tax liabilities accurately.