2023 (5) TMI 1026 - AT - Service Tax

Levy of Service Tax - Business Auxiliary Service (BAS) - Sharing of Revenue - services provided by unincorporated joint venture to its constituent members - principal-to-principal basis or not - tax on share of Gross Win received from the Joint Venture Entity - the Joint Venture Entity. The period in dispute is from October, 2008 to March, 2013 - applicability of circular No. 179/5/2014-S.T., dated 24/9/2014 issued by Tax Research Unit of CBIC in F. No.354/187/2013-TRU - HELD THAT:- A perusal of the joint venture agreement indicates that out of the net collections from the clients (after deducting the winning amounts), these are settled, by paying 55% to M/s GGCPL and 45% to M/s BAPL.

Upon analysis and scrutiny of the joint venture agreement, including the terms and conditions mentioned therein, the adjudicating authority by relying on the circular No.109/03/2009 dated 23/02/2009 issued by CBIC, had held that there is no relationship of service provider or service receiver between the parties to joint venture agreement and there is no consideration received by either side for the claim of rendering certain service. In conclusion, he had dropped the demand of service tax raised in respect of “Business Auxiliary Service”.

This precise issue of retaining certain amount by a hospital towards the necessary infrastructure facilities provided by it to the doctors who render medical services, for which the patients are charged as fees, and the total fees paid are settled between the hospital and doctors at the ratio of 22:78 had come up for consideration earlier before two benches of the Tribunal in the case of M/S SIR GANGA RAM HOSPITAL VERSUS COMMISSIONER OF SERVICE TAX, NEW DELHI [2020 (11) TMI 536 - CESTAT NEW DELHI].

The demand of service tax for which show cause notice dated 17/4/2014 was issued to the respondent relate to taxable service provided or to be provided, to a client by any person in relation to ‘business auxiliary service’ under Section 65(105) (zzb) of the Finance Act, 1994. From the legal provisions on taxable service relevant to this case, joint venture agreement, the clarification issued by CBIC and the various decisions cited on the issue as discussed above, it transpires that there is no involvement of two persons, to execute the terms of agreement; one is to be considered as service provider and other to be service receiver - by relying on the circular No.109/03/2009 dated 23/02/2009 issued by CBIC, had held that there is no relationship of service provider or service receiver, between the parties to joint venture agreement and there is no consideration received by either side for the claim of rendering certain service. He has further held that the agreement specifically provides that the profit/loss arising out of the business should be shared by both sides.

Thus, service tax liability cannot be fastened on the respondent - appeal of Revenue dismissed.