No Service Tax On Income Received From Joint Venture: CESTAT Kolkata Sets Aside ₹5.72 Crore Demand

The Kolkata Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that an assessee's/partner's share of income from a joint venture is not consideration for any taxable service and therefore not liable to Service Tax. R. Muralidhar (Judicial Member) and K. Anpazhakan (Technical Member) observed that the activities undertaken by a partner/co-venturer for the mutual benefit of the partnership/joint venture cannot be regarded as a service rendered by one person to another for consideration and therefore cannot be taxed. In this case, the assessee/appellant entered into a Joint Venture Agreement with GPT Infra Projects Limited/ GPT Infrastructures Pvt. Limited, for executing railway infrastructure work from time to time. In terms of the arrangement between the parties, the profit and loss arising out of the contract was to be shared equally in the ratio of 50% each. The department alleged that the assessee had been evading Service Tax by suppressing the facts about services provided and received by them, in their periodic ST-3 returns. Accordingly, a Show Cause Notice was issued to the appellant alleging that they have evaded payment of Service Tax amounting to Rs. 5,72,02,687/-. The assessee submitted that the principal-client relationship, which is the basic tenet for the applicability of service tax, did not exist between the Assessee and the JV. As per the assessee, the activities undertaken by a partner/coventurer for the mutual benefit of the partnership/joint venture cannot be regarded as a service rendered by one person to another for consideration and therefore cannot be taxed. The Tribunal stated that the element of consideration i.e. quid pro quo, which is a necessary ingredient of any service, is missing. The partner contributes into a common pool of resources required for running the joint enterprise and that if the venture is successful the returns that he gets from the same is his profits and not a consideration for any specific service rendered. Thus, the activity undertaken by a co-venture (partner) for the furtherance of the joint venture (partnership) cannot be said to be a service rendered by such coventurer (partner) to the Joint Venture (Partnership). A contractor-contractee or the principal-client relationship, which is an essential element of any taxable service, is absent in the relationship amongst the partners/co-venturers or between the co-venturers and joint venture. In such an arrangement of joint venture/partnership, the element of consideration, i.e. the quid pro quo for services, which is a necessary ingredient of any taxable service, is absent, added the bench. The bench opined that the share of income received by the assessee from the Joint Venture is not liable to Service Tax. In view of the above, the Tribunal set aside the demand of Service Tax amounting to Rs. 5,72,02,687/-, including Education Cess and SHE Cess, along with interest. Case Title: M/s. Rahee Infratech Limited v. Commissioner of Service Tax Case Number: Service Tax Appeal No. 76709 of 2016 Counsel for Appellant/ Assessee: Ajay Sanwaria Counsel for Respondent/ Department: Mihir Ranjan Click Here To Read/Download Order

No Service Tax On Income Received From Joint Venture: CESTAT Kolkata Sets Aside ₹5.72 Crore Demand

Mehak Dhiman

This is a premium content
Available exclusively to
Our subscribers

INR 1099+GST

Tags

Mehak Dhiman

No Service Tax On Income Received From Joint Venture: CESTAT Kolkata Sets Aside ₹5.72 Crore Demand

Mehak Dhiman

This is a premium content Available exclusively to Our subscribers

INR 1099+GST

Tags

Mehak Dhiman

This is a premium content
Available exclusively to
Our subscribers