Anything paid by the employer to employee as per the employment contract will not be covered under the service tax. Hence the other way round also should not be taxable
Since, services provided by an employee to employer is specifically excluded from the definition of Service, the other way round would not be excluded.
Secondly, Mr. Aggarwal, I believe you are right in stating that it is ‘an act of tolerance’ by allowing the employee to leave early. Hence, it shall be taxable.
1) Since, there is no specific service category for such service, as the same was not taxable earlier, the Service tax shall be payable under ‘Other taxable service’ category;
2) Even though the notice pay is as per the agreement between the employee and the employer, the flow of service is from employer to employee. Only service provided by an employee to an employer is not taxable. [Refer 65B(54)]
I am in complete agreement with CA Vikas Viswakarma Ji. However, some experts have the different view on the ground that the service is directly in relation to the employment and in the course of employment. But, again in my view, the service of 'act of tolerance' is from the employer to emplyee and consideration is received by the employer and hence the same is taxable.
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