2018 (12) TMI 1244 - AT - Service Tax

Recovery of differential Service Tax - amounts paid by NHAI as TDS - time limitation - Held that - There is no dispute as to the fact that the agreement entered by the appellant with NHAI at clause 1.10.2 under taxes and duties clauses wherein the liability to discharge/ deduct the income tax from the consultant, sub-consultant and personnel was on the part of NHAI which they have complied with and it is also undisputed that appellant had received the amount of consideration of the contract and discharged the service tax liability on such an amount. Provisions of Section 195A of Income Tax Act, are very clear inasmuch that where the tax chargeable on the income of payee is borne by the payer, then for the purpose of TDS such income shall be increased to such an amount as would after TDS be equal to the net amount equal to payee - the amount of TDS either deducted from the payee s account or paid on behalf of the payee is considered as income by the Income Tax Act, 1961 and in the case in hand, it is very clear from the records that the amount of consideration on which service tax demand has been raised was reflected and captured from the accounts on verification of the records of the appellant. Undisputedly, the TDS deducted by NHAI and paid on behalf of the appellant is the amount received for the services rendered as amount of TDS which has been paid by NHAI gets reflected as income in the books of the appellant. It is undisputed that appellant has no other income other than amounts received as consideration from NHAI. If that be so, the amount of tax deducted and paid is shown as income and is directly related to the contract entered by the appellant with NHAI, it can be said that the amount of TDS is charged by the appellant to NHAI for services rendered and is definitely liable to the service tax. TDS amount paid by NHAI into the Government Treasury on behalf of the appellant herein was an amount paid towards consideration for the services rendered - impugned order upheld. Time limitation - Held that - The appellant has also not been able to make out a case on limitation for simple reason that despite showing TDS amount as income in his balance sheet, did not indicate the same or reconcile figures with the service tax returns filed by them and revenue had to come out with the figures on verification of the records itself indicates that there was suppression of facts - the point raised on limitation would also not carry the case of the appellant any further. Appeal dismissed - decided against appellant.

Summary

Issues Involved:
- Whether revenue authorities were correct in demanding service tax on the amounts paid as TDS by NHAI on behalf of the appellant.

Detailed Analysis:

Issue 1: Service Tax Demand on TDS Amounts
The appellant entered into an agreement with NHAI and rendered services. The revenue authorities demanded service tax on the TDS amounts paid by NHAI on behalf of the appellant. The appellant argued that they had discharged the service tax liability on the consideration received for services, excluding the TDS amounts. The appellate authority and adjudicating authority found that the agreement with NHAI specified NHAI's liability to deduct income tax, which they did, and the appellant discharged service tax on the consideration received. The appellant contended that the TDS amounts were not part of the consideration for services rendered.

Analysis:
The Income Tax Act, 1961, considers TDS amounts as income of the payee. The appellant showed the TDS amounts as income in their accounts, directly related to the services rendered. The Finance Act, 1994, under Section 67, mandates service tax on the gross amount charged for services. The judgment in Bhayana Builders Pvt Ltd case clarified that the "gross amount" refers to the entire contract value, and if not charged by the service provider, it cannot be included. The TDS amount paid by NHAI was deemed as consideration for services rendered, subject to service tax.

Judgment:
The tribunal upheld the service tax demand on the TDS amounts, as the TDS was considered income related to the services provided. The appellant's argument of discharging service tax on the total consideration agreed was dismissed. The tribunal found no merit in the appeal and rejected it. Additionally, the appellant's plea on limitation was dismissed due to the suppression of facts regarding TDS amounts in their balance sheet.

Conclusion:
The tribunal affirmed the correctness of the service tax demand on TDS amounts paid by NHAI, considering them as part of the consideration for services rendered. The appeal was rejected, and the appellant's argument on limitation was also dismissed.