Tuesday, 22 April 2014

Reimbursable expenses not in the nature of remuneration/commission cannot form part of gross amount for clearing and forwarding agent's services

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

The 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 inview of Rule 6(8)  of   the  Service Tax  Rules,  1994,  providing   for  service   tax   levy  on gross  amount   of  remuneration.

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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