2011 (8) TMI 415 - AT - Service Tax

Valuation - Gross amount - Business Auxiliary service - commission income - Different stand taken before income tax authority and service tax authority - Out of the commission paid by the Bank to the appellant they were in fact paying some amount to the loan seekers as an incentive for taking the loan through them. This amount is hereinafter referred to as subvention . While paying service tax for amounts received as commission from the bank the appellant deducted the amounts of subventions from the amount received from the bank and paid service tax only on the remaining portion of the commission. - Held that - the amount paid by the bank for the services rendered by the appellant and reflected as receipts in the books of accounts of the appellant should be subjected to service tax - service tax is payable on the gross value.

Summary

Issues:
1. Whether service tax should be paid on the gross amount charged by the service provider?
2. Can the appellant avoid paying service tax on the subvention amount not received by them?

Analysis:
1. The appellant provided services as an agent for promoting vehicle loans, receiving commission from a bank. The appellant deducted subvention amounts paid to loan seekers from the commission before paying service tax. The Revenue contended that service tax should be paid on the full commission received. The Tribunal held that service tax must be paid on the gross amount charged by the service provider, as per Section 67 of the Finance Act, 1994. The appellant's arrangement to benefit from TDS deduction for income tax purposes while paying service tax on a reduced amount was deemed contradictory. The Tribunal upheld the lower authorities' decision, rejecting the appellant's appeal.

2. The appellant argued that since the subvention amount was directly paid by the bank to loan customers and not received by them, no service tax should be levied on that amount. The appellant's books showed the total commission received, with bank payments to customers reflected as expenses. However, the Tribunal emphasized that service tax should be based on the gross amount charged by the service provider, regardless of subsequent payments made. The Tribunal concluded that the commission received by the appellant and reflected in their accounts should be subject to service tax, affirming the lower authorities' decision and dismissing the appellant's appeal.