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TMI Blog2024 (6) TMI 769X X X X Extracts X X X X X X X X Extracts X X X X ..... Jnanesh Mohanty Ms.Shreya Mundhra, both Advocates for the Appellant Shri J.Chattopadhyay, Authorized Representative for the Respondent ORDER Per Ashok Jindal : The appellant is in appeal against the impugned order wherein it has been held that the appellant is liable to pay service tax on TDS deposited in the Income Tax Department in relation to the payment made to the service providers. 2. The facts of the case are that the Appellant is engaged in the manufacture of aluminum. In the course of its business, the Appellant received scientific and technical consultancy services from overseas parties. On such services, the Appellant paid Service tax on gross amount of invoices under reverse charge mechanism under Section 68(2) of the Finance Act, 1994 for the period April 2008 to August 2010. 2.1 The Appellant deducted Tax at source and paid the same to the Income tax department in accordance with the terms of the agreement with the parties. 2.2 In view of the aforesaid, it is evident that the consideration payable was agreed as net of all duties and taxes applicable and payable. 2.3 As per Section 195A of the Income tax Act, 1961, the Appellant is liable to deduct Income tax thereon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e amount so deducted cannot be taken as consideration for services rendered. The amount on which the parties have reached a consensus ad idem can only be the consideration for the services. Further, the amount of tax deducted varies and depends upon the rate in force. There is no agreement by the parties with regard to the amount of TDS that has to be deducted. It wholly depends upon the law prevailing in the direct tax regime. 14.2.1Section 2(d) of the Indian Contract Act, 1872, defines consideration . Compliance with statutory provisions cannot be considered as rendering of service. Again, consideration is not doing something which a person is bound by law to do. When the amount is paid at the will of a person not party to the agreement, such amount does not bear the character of consideration. It has to be noted that in the present case, there is no consent from the foreign counterpart to reduce his consideration by deducting the income tax liability from the agreed consideration. While doing business with the foreign counterpart and making payment, they are bound to deduct the tax and deposit with the Government. The appellants have thus grossed up the TDS and complied with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced that TDS has been borne by the appellant. For example, the letter dated 10-5-2006 shows that the appellant has to pay USD 319710 to the foreign company, namely, Thai Nippon Steel Engineering Construction Corporation Ltd. The said amount has been fully paid as per the foreign certificate remittances. They have not deducted TDS but in fact have discharged the TDS liability. The appellant has borne the same as expenses of their company. On such score, we find that the demand of service tax alleging that TDS has not been included in the gross value is incorrect on facts and cannot sustain. We find that the issue is covered by the decision relied upon by the Ld. Counsel in the case of Magarpatta Township Development Construction Co. Ltd. (supra), wherein the facts are as under :- 3. The Learned Counsel took us through the facts of the case and submits that the agreement entered by the appellant with the foreign architect is very clear as the said agreement states that amount to be paid by the foreign architect not to be taxed i.e. by the appellant. He would take us through the agreement and bring to the notice specific clauses; appellant has discharged the Service Tax liability on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be provided. (2) Notwithstanding anything contained in sub-rule (1), the value of taxable services specified in clause (ii) of rule 3 of Taxation of Services (Provided from Outside India and Received in India) Rules, 2006, as are partly performed in India, shall be the total consideration paid by the recipient for such services including the value of service partly performed outside India. It can be seen from the above reproduced Rule that for the purpose of discharge of Service Tax for the service provided from outside India, the value is equal to the actual consideration charged for the services provided or to be provided. In the case in hand, we specifically asked for the invoice/bill raised by the service provider and on perusal of the same, we find that appellant had discharged the consideration as raised in the said invoice/bill. There is nothing on record that indicates that the appellant had recovered that amount of Income Tax paid by them on such amount paid to the service provider from the outside India and any other material to hold that this amount is paid as consideration for services received from service provider. 9. In our considered view, the plain reading of Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch amount paid to the service provider from the outside India and any other material to hold that this amount is paid is consideration for services received from service provider. 9. In our considered view, the plain reading of Section 67 with Rule 7 of Service Tax Valuation Rules, in the case in hand, Service Tax liability needs to be discharged on amounts which have been billed by the service provider. 10. In view of the foregoing, in the facts and circumstances of this case it is to be held that the impugned order is unsustainable and liable to be set aside and we do so. 11. By following the decision (supra) we set aside the impugned order and allow the appeal. We find that when TDS has been borne by the Appellant and only the consideration for services as agreed upon by the parties has been paid to service provider, therefore, the amount of TDS cannot be included in the taxable value to determine the Service Tax liability. Therefore, we hold that as TDS liability has been borne by the Appellant and the value of service provided has already been paid to the service provider, the Appellant has correctly arrived at the taxable value of service received by them and paid the Service ..... X X X X Extracts X X X X X X X X Extracts X X X X
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