Builder partnership

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gaurav bhartiya (Querist)
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28 December 2013 Hello my query is

One partnership firm has built a residential complex containing 25 flats. The firm has 5 partners.

Out of the above 25 flats 20 were sold and 5 remained unsold. The partners distributed the remaining 5 flats among themselves and the flat registry is also done.

Whether service tax is payable on this 5 flats distributed among patners?

If yes then what is the amount to be considered as gross amount reveived?

Thanking You
Gaurav Bhartiya

CA Sanjeev Kumar

CA Sanjeev Kumar (Expert)
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28 December 2013 Basic rule of service tax, if there is consideration then service tax be charged, perhaps in your case, this element is missing and therefore it appears that it is free of cost, or likely in the nature of gift, so no service tax.

Further, consequent application of section-45 & 28.

gaurav bhartiya

gaurav bhartiya (Querist)
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28 December 2013 Thank You Sanjeev Kumar Sir for your reply.

Sir the registry is done at cost to the partners and the amount is debited to partners capital account. So could this be considered as consideration?

Thank You

gaurav bhartiya

gaurav bhartiya (Querist)
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28 December 2013 The query is still open.

CA Sanjeev Kumar

CA Sanjeev Kumar (Expert)
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28 December 2013 It is not relevant that capital has been debited.

Understand the logic ;
1) Partner are representative of firm, and thats a reason only firm is assessed for profit in income tax and partner shares is exempt.
2) In service tax, the rule 3 of SERVICE TAX (DETERMINATION OF VALUE) RULES, 2006 is not apply.
3) Its simply that firm has not received any consideration.

I can give number of reason, but i hope you are satisfied with that...

gaurav bhartiya

gaurav bhartiya (Querist)
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28 December 2013 Thank You very much sir.

gaurav bhartiya

gaurav bhartiya (Querist)
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29 December 2013 Hello Sir
There is one request is there any case law or notification on the above topic?

Thanking You

CA Sanjeev Kumar

CA Sanjeev Kumar (Expert)
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29 December 2013 I do not have the case reference, perhaps, that is the interpretation of law.

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