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April 2014

2014 (33) STR 137 (Mad) Commissioner of S. T., Chennai vs. Sangamitra Services Agency.

By Puloma Dalal, Jayesh Gogri, Mandar Telang Chartered Accountants
Reading Time 1 mins
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Reimbursable expenses not in the nature of remuneration/ commission cannot form part of gross amount for clearing and forwarding agent’s services.

Facts:
The substantial question put forth before the High Court was whether reimbursable expenses such as freight, labour, electricity, telephone etc. received by the assessee at actuals should not be added to the taxable value related to clearing and forwarding agent’s services in view of Rule 6 (8) of the Service Tax Rules, 1994, providing for service tax levy on gross amount of remuneration.

Held:
In the absence of any material to show the understanding between the principal and the client that the commission was all inclusive, it was difficult to hold that the gross amount/commission would include expenses for providing services and all incidental charges for running of business. Receipts in the nature of reimbursements would not take colour of remuneration or commission. Rule 6(8) of the Service Tax Rules, 1994 referred to gross amount i.e. receipts in nature of remuneration or commission.

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