Banking services input credit for rent

Queries 17842 views 7 replies

CA PRASAD KSHIRSAGAR

CA Practice

148 Points Joined October 2013

The following are the facts of the matter in which I expect the views:

1. The service provider is a Co-operative Bank having some branches in maharashtra.

2. One of the branch located is having rental agreement with the landlord which is duly registered since 2009.

3. The branch has been paying rent by pay order to the landlord from time to time however without any service tax.

4. The Landlord has now requested the bank to pay the service tax on past as well as current rent payments

6. No bill or invoice is issued by the landlord to the bank; except that there is communication thru the letters to the branch as well as head office.

I WISH TO HAVE YOUR SAY,

i. Can bank re-imburse the service tax amount to the landlord for past rental payments?

ii Can the bank get the input credit of those payments?

Please do write your comments and suggestions.

Replies (7)

As per my views, Service tax can not be reimbursed merely on the basis of request letter. As per the Cenvat Credit rule,9 Cenvat credit is allowed on the basis of following documents: (1) The CENVAT credit shall be taken by the manufacturer or the provider of output service or input service distributor, as the case may be, on the basis of any of the following documents, namely :- (f) an invoice, a bill or challan issued by a provider of input service.. Besides the above, it is also a prior period expenses.

CA PRASAD KSHIRSAGAR

CA Practice

148 Points Joined October 2013

Thank you CA Neeraj Sir! However may I know if anywhere this issue has been handled and if payment is made by the bank, how the service tax department has taken the view about the allowance or non allowance of the credit.. Regards and thank you for your views.. CA PRASAD KSHIRSAGAR

CA Neeraj Bansal

Profession

191 Points Joined May 2008

CA Prasad Ji, there are similar cases where the assessee has claimed the cenvat credit on the basis of xerox or other improper bills and the Honorable court have also decided against the assessee as the the proper documentation is required as per rules. Service tax department while making the scruitney disallow the cenvat credit.

CA PRASAD KSHIRSAGAR

CA Practice

148 Points Joined October 2013

Respected CA Neeraj Sir, Thank you for your valuable comments on the matter. Many regards to you and seasons greetings to you sir! In this matter, the bank has agreed with the landlord in the agreement itself that, the bank would bear the service tax amount. However, no proper invoices and bills were given by the landlord to the bank. The question may also trigger here whether the landlord can sue bank for the non payment of service tax? Regards, CA Prasad Kshirsagar.

CA Neeraj Bansal

Profession

191 Points Joined May 2008

Prasad Ji, In this regard please check the Lease Deed, or Rent Agreement of Bank with Landlord. This is depend on the deed .

CA PRASAD KSHIRSAGAR

CA Practice

148 Points Joined October 2013

Respected Neeraj Ji, the agreement of rent does have clause of service tax. But since there is no proper invoice being raised by the landlord. So I am just trying to contemplate issues if the landlord sues the bank, can bank buy some defense to itself. Though agreement binds bank, there being no bill raised, can the Bank defend if required in the Court. Regards CA Prasad

CA PRASAD KSHIRSAGAR

CA Practice

148 Points Joined October 2013

Dear All,

This discussion is going on for a long time now. However, there is a case to quote for all. The citation is as follows "M/s Bhagwati Security Services (Regd.) Versus Union of India [2013 (11) TMI 649]" I would like to know the effect of the above case on the similar cases where the people will start demanding the service tax amount to be reimbursed by the parties.