TMI Blog2014 (11) TMI 207X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion made by the learned counsel that somehow many of the licences for which licensing agreement provided for usage by HDC were actually developed by the firm itself and according to the appellants, the registration had to be done in the name of one of the partners, because the partnership firm has no legal personality. At the same time to enable the firm to use the name and since the products were manufactured in the name of the firm, a licence agreement would be required. In our opinion, even if it is assumed that a firm is a distinct entity, the nature of transactions between the two partners and the firm would be one of joint-venture or a profit sharing operation and it is difficult to sustain the stand that there is a service receiver and provider relationship. – Stay granted. - ST/3340/2012-DB, ST/3341/2012-DB - MISC ORDER No.21432-21433/2014 - Dated:- 24-6-2014 - SHRI B.S.V.MURTHY AND SHRI S.K. MOHANTY, JJ. For the Appellant : Shri K.S. Ravishankar Shri N. Anand, Advocates For the Respondent : Shri Ganesh Haavanur, Addl. Commissioner(AR) ORDER Per : B.S.V.MURTHY Even though there are two appeals challenging two separate orders, they can be deal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the quantum of consideration, the share of HGHL in the gross profit of the firm was taken and service tax with interest was demanded. In respect of Indian partner who had provided land, building and other manufacturing facilities as capital, the officers felt that HDPL was liable to pay service tax under the service category of business support service and intellectual property rights service . It was felt by the officers of the Revenue allowing the use of trademarks is taxable under the category of intellectual property service and the activity allowing their land, building and other properties to be used by the firm has to be classified under the taxable category of business support service . 5. Proceedings were initiated which have culminated in confirmation of the demand for service tax of ₹ 11,67,91,866/- for the period from 19/04/2006 to 31/03/2010 from HDC with interest and an amount of ₹ 1,77,29,748/- from HDPL with interest. Penalties have been imposed under Section 77 and 78 of the Finance Act on both the appellants. 6.1. The learned counsel on behalf of the appellants submitted that HGHL had contributed capital of about ₹ 85 crores as on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9, Hon ble Supreme Court held that a partnership firm under the Indian Partnership Act, 1932 is not a distinct legal entity apart from the partners constituting it and equally in law the firm as such has no separate rights of its own in the partnership assets and when one talks of the firm s property or the firm s assets all that is meant is property or assets in which all partners have a joint or common interest. It cannot, therefore, be said that, upon dissolution, the firms rights in the partnership assets are extinguished. It is the partners who own jointly or in common the assets of the partnership and, therefore, the consequence of the distribution, division or allotment of assets to the partners which flows upon dissolution after discharge of liabilities is nothing but a mutual adjustment of rights between partners and there is no question of any extinguishment of the firm s rights in the partnership assets amounting to a transfer of assets within the meaning of Section 2(47) of the I.T. Act, 1961. 7. Learned AR would again refer us to the same Section 4 of the Partnership Act and draws our attention to the partnership deeds which form part of the records. According to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich are specified in the Act itself. Therefore, in our opinion, the fact that partnership deed has been registered or not may not be very relevant and at this stage and we do not consider that it would make a material difference unless we consider the statutory details and other aspects in greater depth and come to a contrary conclusion, which can be done at the time of final hearing. 10. When the firm is not a legal person and is not a distinct entity and is not distinct and independent from partners, it is difficult to accept the view upheld by the learned Commissioner that there is a service receiver-provider relationship between the two partners and the firm. When the firm is not at all a person and is not distinct from the partners, this observation is difficult to sustain. 11. The next submission made by the learned counsel was that Department was not correct in jettisoning out rightly the law of partnership by holding that profit sharing is a service/consideration, totally ignoring mutuality and traffic of interest of partners. The very fact that demand has been confirmed on the basis of percentage of profit that too gross profit would itself show that the service prov ..... X X X X Extracts X X X X X X X X Extracts X X X X
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