Transfer of consideration


Dear all

Company A had launched a Group Housing Project and received many bookings from prospective buyers. Subsequently the project went into trouble due to Court Cases on Land Acquisition and as a result people started cancelling the booking. Company A, gave two options to the clients 1) to get the entire refund (including service tax paid to the govt) 2) obtain a flat in its Holding company's project in lieu of refunds. Some clients have opted for option 2 and give autority letter to the company to transfer the amount to Holding company.

Company A had paid service tax to the govt on these bookings transferred. whether the Holding Compay can adjust the amount paid to the Govt.

I would appreciate if senior professionals give their comment on this

 

CS Saju Philip

sajuphilipcs @ yahoo.com              

Replies (4)

There is no direct provision in the statute allowing such an adjustment. I feel that since the service will be provided by the holding company, they are liable to tax on the amount trasnferred from company A  as well.I feel that you can try refund u/s 73A (6). But only the customers get the refund. We will see opinion of other experts.

I agree with CA U.N.N., there is no such provision in law by which one company can adjust the service tax paid by other company even they are are holding-subsidiary because both are seprately registered under service tax. As per my understanding, you have following option available: >Subsidiary company should apply for refund and holding company pay service tax now. *views of others experts are invited*

Thanks for the reply. Your opinion is sought with respect to the refund . The facts are

1) the Company is transferring the entire amount upon receipt of letter of request from the clients to the effect that they are cancelling the booking and instead of paying back the money directly to them, transfer the same to the Holding company for and on behlaf of them.

2) on the basis of such an instruciton, the company is transferring the entire instalments paid by the customers to the holding company.

3) Holding company is paying ST on the entire amount transferred to them.

Here, in my view,  the question of 'unjust enrichment' would not exist and the company can say that the burden has not passed on any one else. Because the the tax the company has colloecte firstly paid to the Govt and then on cancellation of booking paid back the same to the individual clients (through transfer) from their own account.

Please comment

CS Saju Philip

sajuphilipcs @ yahoo.com

If you refund tax amount to buyers and transfer balance amount to the other company you can get over unjustenrichment. You can try this but still the refund is a difficult process.

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