2010 (3) TMI 221 - AT - Service Tax

Chartered Accountants Service scope of certification services provided by CA certificate issued in terms of section 92E and rule 12E of income tax held that the certification in question will clearly fall under Audit/Certification Services even as per the clarification dt. 7.10.1998 issued by the Ministry of Finance. The verification of the books of accounts precedes issue of a certificate and such verification will fall within the scope of accounting & auditing function demand sustained.

Summary

Issues:
Levy of service tax on certification services under auditing service category; Challenge to tax imposition by Practicing Chartered Accountants; Interpretation of Section 92E and Rule 10E of the Income Tax Act, 1961; Determination of certification services falling under Audit/Certification Services for tax liability.

Analysis:
The appeal challenges the levy of service tax on certification services amounting to Rs.2,20,000, along with interest and penalties, imposed under Sections 76, 77, and 78 of the Finance Act, 1994. The appellants, who are Practicing Chartered Accountants, contest the tax imposition on the grounds that the services provided do not fall under the category of 'auditing service' as per Notification No.59/98-ST dated 16.10.1998, and hence should be exempt from taxation.

The judgment delves into the interpretation of Section 92E and Rule 10E of the Income Tax Act, 1961, concerning the certification related to the computation of income from international transactions. Section 92E mandates obtaining a report from an accountant for international transactions, to be furnished in the prescribed form and manner. Rule 10E specifies the format of the report, which should be in Form No.3CEB. Additionally, the requirement of an audit report under Section 224 of the Companies Act, 1956, is highlighted in the judgment.

The judgment reproduces a sample certificate under Section 92E, emphasizing the necessity of proper information and document maintenance by the assessee concerning international transactions. It further discusses the verification process preceding the issuance of a certificate, which is deemed to fall within the domain of 'accounting & auditing' functions. The judgment cites a clarification issued by the Ministry of Finance on 7.10.1998, asserting that the certification in question falls under Audit/Certification Services. Consequently, the tribunal upholds the tax imposition and rejects the appeal, affirming that the services provided by the appellants constitute 'auditing service' liable to service tax.

In conclusion, the judgment elucidates the applicability of tax on certification services rendered by Practicing Chartered Accountants, emphasizing the inclusion of such services under Audit/Certification Services based on the interpretation of relevant provisions of the Income Tax Act, 1961.