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2017 (7) TMI 294 - AT - Service TaxNon-payment of service tax - services received from the branches as well as the services availed by the permanent establishment for which payment has been made by the headquarters of the appellant - Held that: - It is apparent that the tax authorities find themselves confounded by the inappropriate application of section 66A to the transaction between the overseas branch and the appellant. That tax should be levied on services enumerated in section 65 (105) of Finance Act, 1994 received from abroad is axiomatic. That corporates exist as globalised entities with subsidiaries, branches and other establishments is a commercial reality. Though such branches have an independent status owing to the existence of frontiers in legislative jurisdiction, commercially, there is no distinction between a branch and its head office. More so, in the context of accounting treatment except that the final accounts of the entity may indicate the branch operations separately. Nevertheless, an expense of the branch is an expense of the entity and a receipt in the branch is a receipt of the entity. Unless it is also established that the service has been provided to the person in India, a monetary transfer is not sufficient to invoke section 66A of Finance Act, 1994. In the absence of an activity between the branch and the headquarters for an identified consideration, the remittance received from overseas customers through the branch to the appellant would not be liable to tax. With the adjudicating authority having segregated the services that are not relatable to the location of the recipient under the Place of Provision of Services Rules, 2012, taxes been confirmed on such services as are relatable to the location of the recipient. It has been held that it is not the overseas branch/permanent establishment that has received the service but the entity in India. We note that the demutualisation that has been legislated in section 66A would not be applicable after 1st July 2012. Consequently, there is no distinction between the overseas establishment and the controlling establishment in India. It would therefore appear that, for the period after 1st July 2012 the services that have been availed and which fall within the scope of rule 4 of Place of Provision of Services, 2012 are liable to tax - matter needs reconsideration for the purpose of quantification - appeal allowed by way of remand.
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