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2018 (9) TMI 253 - AT - Service TaxReverse charge - variation in the value due to exchange rate variation - revenue neutrality - demand of service tax with interest and penalty - Revenue has sought to demand service tax only in respect of those payments which were in excess of the amounts booked in their book of accounts. However department has not given any credit were the amounts paid were actually less than the amounts booked in the book of accounts. - Held that:- the service tax in all such cases is required to be determined, immediately when the transaction between the Associated Enterprises get reflected in the books of account and not when the payment is made. This is view is also in line with AS-11 issued by the Accounting Standard Board of ICAI. Any other view would not be incorrect but also against the basic scheme of Service Tax Law, and would be only lead to arbitrage of tax, because any person will like to determine the taxable value in such transactions on the date when the exchange rate is minimum and thereby will reduce the tax payable. In our view the such tax arbitrage cannot be sound principle of taxation in any tax system. Undisputed fact is that demand has been made in respect of the gross amount after taking into account the exchange rate fluctuation less the amounts booked in the book of accounts on the receipt of invoice for the services received. Appellants have paid the service tax on the amounts actually calculated by taking into account the prevalent exchange rate and the gross invoice value, on the date when invoice was received and expenditure booked in the books of account - by insertion of section 67A, intention of legislature for laying down the date for determination of taxable value and tax incidence, on the date of providing the service or when the service has been agreed to be provided has been made crystal clear. In a way the determination of taxable value and tax incidence has been totally delinked from the date of payment of tax. Appeal allowed - decided in favor of appellant.
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