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2018 (5) TMI 408 - AT - Service TaxIntellectual property service - royalty - demerging of units - It was alleged in the show-cause notice that royalty is recoverable not only on the income from operation but from miscellaneous income like sundry balance written back, liquidated damages, fines and penalty charges, foreign exchange difference, sale of scrap, transfer and cancellation fees etc. Held that: - AVL was earlier part of the appellant but demerged from the appellant in the year 2008 by a scheme of arrangement and as per the scheme of arrangement, AVL is required to pay royalty to the appellant for use of 'Sahara' brand @ 5% of the annual turnover. - though SITV is separately registered with the Service Tax Department, but it is not a separate legal entity rather it is a division of the appellant who has discharged the service tax liability on behalf of the appellant and this does not tantamount to discharging the service tax liability of another company because the appellant and SITV form part of the same company and it is only a division of the appellant. The division of a company is not a separate company and the payment of service tax by the division would be deemed to be the payment by the company. The demand of ₹ 16,25,553/- is on account of miscellaneous income for which the appellant has not charged any royalty - Held that: - the appellant had not raised any invoice for royalty on this amount We also find that during the relevant period 2007-08 and 2008-09, the tax was payable only when the service provider has received the amount as provided in Rule 6 of Service Tax Rules, 1994 - Since in this case, the appellant has not raised invoice for the royalty amount on AVL and accordingly has not received the amount, therefore, as per the provisions contained in Rule 6 of Service Tax Rules, 1994, the appellant is not liable to pay service tax on this amount. Appeal allowed - decided in favor of appellant.
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