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TMI Blog2023 (3) TMI 1498X X X X Extracts X X X X X X X X Extracts X X X X ..... eiver who has his business establishment in India, is liable to pay Service Tax, on behalf of the service provider. The Appellant thus paid Service Tax on the value of service charges under reverse charge mechanism. 4. The Appellant paid an amount of Income Tax as TDS. As per the terms of agreement which is extracted below - 4. Statutory: Service tax and other taxes & duties if any shall be to our (PPL) account Under double taxation avoidance agreement, in case M/s. Ardaman get refund in their country against the tax deduction certificate the same shall be refunded to PPL upon receipt. The consideration payable was agreed as net of all duties and taxes applicable and payable. In other words, the consideration agreed will be paid by the appellant to the service provider and any amount of tax payable in India, shall be borne by the Appellant. 5. As per Section 195 of the Income Tax Act, 1961, the Appellant is liable to deduct Income Tax thereon (TDS) at the stipulated rate on the aforesaid payment. Since, as per the agreements, the Appellant had to bear all taxes including TDS, the amount of consideration agreed was grossed up and the TDS which is to be borne by the Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11. On careful consideration of the submissions made by the both the sides, we have gone through the records and found that as per the invoice, the Appellant is paying Service Tax on the value of services provided by foreign service provider and as per the statutory provisions, the Appellant was required to deduct Income Tax at source. In that circumstances, the Income Tax component which is to be deducted at source, if refunded to the service provider, the same shall be refunded to the Appellant itself. In that circumstances, the value of service provided by the foreign service provider remains the same as what the tax deducted by the Appellant at source the same is borne to the Appellant. 12. The said issue has been examined by this Tribunal in the case of TVS Motor Company Ltd. (supra) and this Tribunal has observed as under:- "14.1.4 The TDS is paid/deposited to Government by the appellant out of a statutory liability. Such activity of deducting the tax at source is a legal obligation and the amount so deducted cannot be taken as consideration for services rendered. The amount on which the parties have reached a consensus ad idem can only be the consideration for the servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has short paid Service Tax to the extent of TDS deducted from the value of service charges." (Emphasis applied) XXXXXXXXXXXX 14.4.1 The said issue has been considered by the Tribunal in various decisions. In the case of M/s. Hindustan Oil Exploration Co. Ltd. (supra), the Tribunal had held as under : "5.1 The first issue is with regard to non-inclusion of TDS part which is paid under reverse charge mechanism for the services provided by foreign company. The Ld. Counsel for appellant has explained that there were two types of contracts and in the second category, the tax has to be borne by the service recipient which is the appellant herein. There is no dispute with regard to the service tax that is payable under the first category as a services provider. The demand is only with regard to the second type of contracts. The appellant has furnished documents to show that though TDS amount is deposited the same is borne by the appellant and has not been made part of the consideration. On perusal of documents, we are convinced that TDS has been borne by the appellant. For example, the letter dated 10-5-2006 shows that the appellant has to pay USD 319710 to the foreign compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is liable to pay service tax. The Ld. Counsel has produced a copy of the agreement and demonstrated that the appellant has paid TDS to the Government over and above the royalty paid to the foreign company. On the royalty the appellant has discharged the service tax. The Commissioner (Appeals) has set aside the demand prior to 18-4- 2006. The Mumbai Bench of the Tribunal in Magarpatta Township Dev. & Construction Co. Ltd. (supra) has held that the demand of service tax on TDS portion cannot sustain. Relevant portion of the said decision is reproduced as under :- 8. Service Tax Valuation Rules, 2006 before amendment by Notification No. 24/2012-S.T., specifically Rule 7 needs to be read to arrive at the correct value of taxable service provided from outside India relevant Rule is reproduced :- "7. Actual consideration to be the value of taxable service provided from outside India (1) The value of taxable service received under the provisions of Section 66A, shall be such amount as is equal to the actual consideration charged for the services provided or to be provided. (2) Notwithstanding anything contained in sub-rule (1), the value of taxable services specified in claus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder 1. the provisions of Section 66A, shall be such amount as is equal to the actual consideration charged for the services provided or to be provided. Notwithstanding anything contained in sub-rule 2. (1), the value of taxable services specified in clause (ii) of rule 3 of Taxation of Services (Provided from Outside India and Received in India) Rules, 2006, as are partly performed in India, shall be the total consideration paid by the recipient for such services including the value of service partly performed outside India. It can be seen from the above reproduced Rule that for the purpose of discharge of Service Tax for the service provided from outside India, the value is equal to the actual consideration charged for the services provided or to be provided. In the case in hand, we specifically asked for the invoice/bill raised by the service provider and on perusal of the same, we find that appellant had discharged the consideration as raised in the said invoice/bill. There is nothing on record that indicates that the appellant had recovered that amount of Income Tax paid by them on such amount paid to the service provider from the outside India and any other material to h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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