Pradeep Jain - Chartered Accountant

Query

(CA.Mohammed Lakkadsha) Posted On: 30 May, 2014

I regularly read your articles , opinions and views on taxmanagementindia.com and really appreciate your contribution . Sir I need a valuable opinion on service tax issue I would very much grateful for the same. A Real Estate service Provider firm “A” having taxable services less than 10 lacs hence exempted in F.Y 11-12. In following year F.Y 12-13 raised four bills each of 30 lacs approx ( aggregating 120 Lacs) in August-2012 on company “B” , but the bills were disputed by the service receiver “B” and negotiation were done but remain un-settled till 31/03/2013. But the service receiver provided an amount of 110 lacs in his books on which he has done TDS of Rs. 16 lcas approx. Now in order to reconcile for Income purpose and to get credit of Tax the firm “A” also offered the amount for tax during the year 12-13 . Eventually bills were settled in June-13 ( F.Y 13-14) and service tax liability was duly settled on actual gross receipt and tax being paid on receipt basis was shown in St-3 for Period Apr-Sep-2013. But now the issue was raised by the department that liability arises on due basis beyond 50 lacs as per proviso to Rule 6 of service tax as the aggregate amount of taxable services exceeded 50 lacs . The department intend to levy interest and penalty for delayed payment of taxes. Can “A” take stand that we have offered Income for Income tax purpose in order to get benefit of Prepaid tax ( TDS) and bills were settled in June-13 and accordingly taxes were paid hence no question of interest and penalty thereof. Is contention of “A” tenable in law . Pls Guide.

The fourth proviso to rule 6(1) of the services tax Rules, inserted with effect from 1/4/2012, provides that in case of individuals and partnership firm whose aggregate value of taxable services provided from one or more premises is 50 lakhs rupees or less in the previous financial year, the service provider shall have the option to pay tax on taxable services provided or to be provided by him up to a total of rupees 50 lakhs in the current financial year, by the dates specified in rule 6(1) with respect to the month or quarter, as the case may be, in which payment is received. As per this case, “A” has provided 10 lakhs rupees in F.Y. 11-12 , this is below the limit i.e. 50 lakhs rupees, so benefit will be available.

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