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October 2016

2016 (43) STR 634 (Tri. –Mum.) Rent Works India Pvt. Ltd. vs. CCE, Mumbai V

By CA Puloma Dalal
CA Jayesh Gogri
CA Mandar Telang
Chartered Accountants
Reading Time 1 mins
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Different departments of Government of India cannot take different stands on same transactions.

Facts:  
Appellants paid salary to a foreign national person being the director of the company. Service tax was demanded under reverse charge mechanism on such payments. Relevant agreement, minutes of board meetings, records available at the website of Ministry of Company Affairs as well as income tax decision were produced holding that the amount paid was nothing but salary to director. Revenue stated that these evidences were not produced before lower authorities and argued that though the person was director, invoices indicated that the payment was made towards consultancy charges.

Held:
The agreement was for providing services for monthly remuneration and additional amount at the discretion of board of directors. The director had signed the Balance Sheet of the period under consideration. Therefore, the amount paid was towards remuneration. If the amount is considered as salary by income tax department, one branch of Ministry of Finance, the other branch viz. service tax department cannot hold it to be consultancy charges. The same department of Government of India cannot take different stand on the amount paid to the very same person and treat it differently.

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