Service tax on resource sharing

This query is : Resolved

CA Bhushan Bhagwat Bharambe (Querist)
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02 July 2013 Hi all,

can anyone please help me out on following issue i am facing.

Say there are number of companies in a group.

Take example of Reliance/Tatas/Birlas group.

They have, insurance , finance , realty and what not.

Say they have corporate office for all those companies at one place.

Say one of the group companies incurs all the common expenses as follows and get them reimbursed on some basis at cost from all other group companies

Expenses.
1.Salary of Employees
2.Maintenance of HO
3.Common Logo , Brand building Exp,
4.Common Traveling & Conveyance
5.and other expenses which are not specifically allocatable to a particular group company but all the group companies are enjoying the benefit of the expenses.

While the company which is getting the expenses reimbursed from other group companies,is doing so at cost without making any profit , IS SERVICE TAX APPLICABLE ON SAME???.

CA Vipin Jain

CA Vipin Jain (Expert)
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02 July 2013 Dear Mr. Bhushan,

I think Service Tax not applicable on this. In definition of service it is clearly mentioned that activity to be carried out by one person for another for consideration. In the case you mentioned there is no consideration. Also status of person need to be seen case to case basis. There may be a case when two organisation would not be treated as separate entity. In that case also it would not be taxable.

regards

CA Vipin Jain

MOHAMMAD SALIM

MOHAMMAD SALIM (Expert)
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08 July 2013 This a a very dicey issue... However in general several courts have decided that sharing of costs is not subject to service tax. However in case of deputation of employees and reimbursement of salary in case of ONGC the CBEC had stated that same is subject to service tax.....

For providing opinion complete facts are required....

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