2020 (1) TMI 423 - AT - Service Tax

Levy of service tax - commission earned by the Managing Director of the appellant company, apart from his fixed salary, is in lieu of services provided by him for promotion of the sales in the market - payment of TDS under the head salary - HELD THAT - If the entire remuneration stands considered by Income Tax Authorities as salary, the same cannot be considered as service, so as pay the service tax. The Income Tax Authorities are the prime authority to adjudge the said issue. If according to the learned Advocate the Income Tax Authorities have considered the entire remuneration as salary and have taxed the same accordingly, the said fact would have a bearing on the disputed issue. Inasmuch as, the adjudicating authority has not dealt with the said aspect and has not verified the fact of assessment by Income Tax Authorities under the head salary , it is deemed fit to set aside the impugned order and remand the matter to the Original Adjudicating Authority for fresh consideration - appeal allowed by way of remand.

Summary

Issues: Determination of whether the commission earned by the Managing Director is liable to service tax.

Analysis:
1. The lower authorities confirmed a service tax demand against the appellant for the commission earned by the Managing Director, considering it as a service provided for promoting sales. The demand was raised for the period from 2012-13 to 2013-14.
2. The appellant argued that the commission is part of the Managing Director's salary as per the employment agreement, which linked it to sales. They highlighted provisions of the Companies Act requiring the entire remuneration of the Managing Director to be considered as salary.
3. The appellant clarified that the TDS was initially filed under two different forms with the Income Tax Department, but it was later rectified and modified. The Income Tax Authorities assessed the TDS under the head of 'salary.'
4. The Tribunal noted that if the Income Tax Authorities have considered the entire remuneration as salary and taxed it accordingly, then it cannot be considered a service for the purpose of service tax. As the Original Adjudicating Authority did not address this aspect, the matter was remanded for fresh consideration. The appellant was granted the opportunity to present their case and contest the demand, while all other issues, including the plea of limitation, were left open for further examination.