Service tax-existing sole proprietary converted into firm
This query is : Resolved
29 May 2014
A proprietory concern providing CA services has been in existence for 30 years. Total service income for the past few years is around Rs7 to 8 lakhs.
New partners have joined the firm during the year and the existing work is split between all three partners. The cumulative billings exceed 10 lakhs. However the billings are also split based on work done. So the firm and its partners individually do not cross 10 lakhs. There are very few additions after the firm was formed.
In future if a Service tax scrutiny/query comes up, will there be a contention from the service tax department that the firm was formed to escape service tax liability? Can it be argued that service income is based on work done by respective partners, although they were brought in by the original sole proprietor by virtue of his long standing practice?
New partners have joined the firm during the year and the existing work is split between all three partners. The cumulative billings exceed 10 lakhs. However the billings are also split based on work done. So the firm and its partners individually do not cross 10 lakhs. There are very few additions after the firm was formed.
In future if a Service tax scrutiny/query comes up, will there be a contention from the service tax department that the firm was formed to escape service tax liability? Can it be argued that service income is based on work done by respective partners, although they were brought in by the original sole proprietor by virtue of his long standing practice?
Nitin Bhuta
(Expert)
29 May 2014
No both identities are distinct and separate services provider hence question of raising such issue doesn't arise. One is always do legitimate tax planning under all scenarios.
Rupesh Jain
(Expert)
30 May 2014
if they have partner and there receipts above ten lacs then they have to pay service tax.
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