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2022 (9) TMI 167 - Service Tax
Levy of service tax - receipt of intellectual property service from the overseas entity - consequence of merger on the appointed date was tantamount to acknowledging the overseas transfers as their own or not - HELD THAT:- In any case, deeming that the amalgamated entity came into being on 1st April 2009, the status of the amalgamating entities outside India needs to be borne in mind and it is not seen from the records that they have ceased to operate at those locations after the appointed date. That would have been impossible considering that the effective merger occurred in April and May 2010. Therefore, the consequence of deemed amalgamation from 1st April 2009 would be to deem the foreign companies as overseas offices of the appellant.
Section 66A(2) of Finance Act, 1994 and the Explanation therein make it abundantly clear that, for the purposes of the levy thereof, such units are to considered as independent; in such circumscribing circumstances, the procurement of services outside India by the branch or office of an Indian assessee does not fall within the purview of rule 3 of Taxation of Services (Provided from Outside India and Received in India) Rules, 2006.
The impugned order has failed to identify the ‘taxable service' that the erstwhile foreign entities had obtained from the foreign service provider without which the test of Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 is not met. The adjudicating authority has failed to consider the deemed demutualization of amalgamated entity and amalgamating entities for the period prior to effective merger and has superficially applied the appointed date conundrum to the ‘no brainer’, and default, articulation in section 66A of Finance Act, 1994 without taking in the entire canvass of this special provision of law to charge tax on specifically intended transactions.
The impugned order has failed to be in compliance with the mandate of section 66A of Finance Act, 1994 warranting it to be set aside - Appeal allowed - decided in favor of appellant.