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When TDS liability of foreign service provider is borne by service recipient and the service provider is paid entire consideration as per the contract, such TDS component would not constitute consideration for service.Facts
Appellant received services of a foreign architect for designing and planning of various commercial buildings and service tax liability was discharged on actual consideration paid. As regards TDS liability under the income tax law, in respect of consideration paid to foreign architect, it was borne by the appellant as determined by the terms of agreement. Service tax demand was raised on said TDS component by contending that the TDS would also form part of consideration.
Held
On perusal of the agreement between the appellant and the foreign architect, it was found that the gross amount charged was exclusive of TDS. It was noted that the erstwhile Rule 7 of Service Tax (Determination of Value) Rules, 2006 clearly stated that actual consultant charges needs to be taxed. Hon’ble Tribunal observed that combined reading of erstwhile section 67 of Finance Act, 1994 and the said Rule 7 indicates that amount billed by the service provider is liable for service tax. In present case, when it was found that service tax was paid on entire invoice amount and nothing was on record to provide that TDS component was collected from foreign architect, it was held that TDS liability borne by appellant and paid out of its own pocket cannot constitute consideration for service and accordingly there is no service tax liability.
