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2015 (11) TMI 106 - AT - Service TaxValuation - Section 67 - Associated enterprises - lease rent equalisation shown in Balance sheet - Held that:- General rule in case of associated enterprises is that even a book adjustment or any credit or debit entry in any account by whatever name called in the books of accounts of the Service Provider is equated with receipt of 'the gross amount charged' by the Service Provider to the service Recipient. This method, however, is one of the modes of payment included in the definition of 'gross amount charged' contained in clause (c) of the Explanation to section 67 of the Act. The other modes of payment are by cheque, credit card, deduction from account and any form of payment by issue of credit notes or debit notes. To qualify as 'gross amount charged' there must first be a payment. It is this payment which must be in the nature of a consideration for the Service. The word 'consideration' has been defined in clause (a) of the explanation to section 67 to include any amount that is payable for the taxable services provided or to be provided. Lease rent equalisation is only an entry made in the balance sheet. But the question is whether it is an amount 'payable' for it to constitute 'consideration' for the services rendered by the appellant. For this purpose, the appellants have relied upon Accounting Standards. The appellants justify that there is a specific Accounting Standard for operating leases, which is AS19. In order to understand the meaning of the lease rent accounting recourse can be had to AS19. Such an approach has also been followed by the Hon'ble Supreme Court in Dai-Ichi Karkaria (1999 (8) TMI 920 - SUPREME COURT OF INDIA) and Association of Leasing and Financial Service Co vs Union of India (2010 (10) TMI 4 - SUPREME COURT OF INDIA ). The department has not been able to show us any contrary decision or furnish any reasons why we should not follow AS19. The audit report relied upon by the Ld. Sp. Counsel and the Commissioner concludes that the lease rent equalisation is an 'income', and chargeable to service tax as the gross amount received by the appellants. - The amount shown in the balance sheet is not an 'income' for the purposes of computing Tax under the Income Tax Act. In the result it is also not a 'payment' actually received or receivable, and therefore neither 'consideration' nor the 'gross amount charged' in terms of clauses (a) and (c) respectfully of the explanation to Section 67 of the Act. Hence the appellant is not liable to pay Service Tax on the amount of lease rent equalisation shown in the balance sheet. - Decided in favour of assessee.
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