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2014 (4) TMI 685 - AT - Service TaxWaiver of pre deposit - business of marketing telecom services - Incentive for work done - Applicant claim that these incentives were to be paid to the staff of the applicant, hence not liable to service tax - Held that - Prima facie, we feel that there is nothing in the contract which shows that the payment of incentives was to the employees of the applicant and not to the applicant themselves. Further, the legal question whether employees can be considered to be distinct from the applicant in this transaction with the M/s. Bharti Telenet also is a debatable issue - Conditional stay granted.
Issues:
1. Whether incentives paid by M/s. Bharti Telenet Ltd. to the employees of the applicant form part of the consideration received by the applicant, attracting service tax liability? Analysis: Issue 1: The case involved a dispute regarding the service tax liability on incentives paid by M/s. Bharti Telenet Ltd. to the employees of the applicant. The applicant contended that these incentives were meant for their staff and did not form part of the consideration received by them. On the other hand, the revenue argued that all payments made by M/s. Bharti Telenet Ltd. to the applicant constituted consideration for services provided, regardless of whether they were fixed commissions or variable incentives based on performance. The Tribunal noted that the contract did not explicitly specify that the incentives were for the employees and not the applicant. Moreover, the question of whether the employees could be considered distinct from the applicant in this transaction was deemed debatable. Consequently, the Tribunal directed the applicant to make a predeposit of Rs.1,50,000 towards the tax demand for admission of appeal, with a stay on the collection of the remaining dues during the appeal's pendency. This judgment highlights the importance of clear contractual terms in determining the tax liability on incentives paid to employees, emphasizing the need for unambiguous documentation to support claims of non-taxability based on the recipient of such payments.
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