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No Service tax liability arise on loans and advances if it is revealed in the audited balance sheet

Service Tax - By: - Bimal jain - Dated:- 20-4-2015 - Dear Professional Colleague, We are sharing with you an important judgment of Hon ble CESTAT, Mumbai, in the case of Reliance Infratel Ltd. Vs. Commissioner of Service tax, Mumbai - II [2015 (4) TMI 129 - CESTAT MUMBAI] on the following issue: Issue: Whether Service tax liability can be arise on loans and advances, if it is revealed in the audited balance sheet? Facts and background: Reliance Infratel Ltd. ( the Appellant or the Company ) is a .....

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nto existence by way of expenses towards the initial setting up and also by way of payments made to vendors for supply of materials. Further, since the Telecom towers require huge investments the Appellant borrowed ₹ 1210/- crore from RCM during June, 2007 and September, 2007 as interest-free loan which was repaid/ returned by December 31, 2007. Investigation of the Appellant was initiated on November 26, 2007 by the officers of Directorate General of Central Excise Intelligence ( DGCEI ) .....

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008 which was confirmed by the Adjudicating Authority. Being aggrieved the Appellant preferred an appeal before the Hon ble Tribunal, Mumbai contending that the sum of ₹ 1, 493/- crores ( impugned amount ) received by the Appellant from RCM is a loan by way of Inter Corporate Deposits given to the Appellant. Held: The Hon ble CESTAT, Mumbai held as under: The Agreement and the audited balance sheets of the parties does not lead to a conclusion that the impugned amount received by the Appe .....

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, there is no dispute that the Appellant had repaid ₹ 1,210/- crore received from RCM during the same financial year; Amount of ₹ 283/- crore was given before the Appellant came into existence and the same was repaid during the same financial year, hence ₹ 283/- cannot be treated as a consideration received for the services to be rendered by the Appellant but it is a financial support given by RCM to the Appellant by way of loans. Further, both the parties being Public Limited .....

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