Under manpower services – Provident fund and bonus paid
shall be included in taxable service and service ta x shall be
Section 67 of the Finance Act, 1994- Valuation of S ervices
In case of “Laxmi Construction v Commissioner in CESTAT Allahabad” 2016
STR561, Tribunal Allahabad
It is decided that provident fund, statutory payab le by appellant for taxable services
provided to client and bonus amount paid to them as incentive , though not pre-fixed as
periodicity and quantum , constitute additional rem uneration received and includable in
total consideration received for service tax purpos e
Fact of the Case 1. PF consist of contribution made by employee and employer. Employer contribution has
been received from Hindalco industries and fully pa id to the PF Commissioner. It is not
wages or salary , hence not part of consideration f or services rendered.
2. The bonus payment are incentive for workers. It is not fixed amount and as such can not
be added to taxable consideration.
3. The Hon’ble High Court of Delhi in case of Inter continental Consultants and Technocrats
P ltd. held that the expenditure or cost incurred f or service provided can not be
considered as gross amount charged for such servic es.
4. The amendment has been made in Section 67 of the Finance Act,1995 through Finance
Act,2015 to the effect that the gross consideration for taxable services shall include all
reimbursable expenditure or cost incurred and charg ed by the service provider. Though
CBEC letter dated 28.02.2015 stated that the amendm ent is to give effect to the
intention of the legislature that such inclusion ar e always to be made, such intention can
not be ground for giving to the same prior to such amendment;
5. Ld. AR of the revenue reiterated the finding of the lower Appellate Authority.
6. We have heard both the side and examined appeal records. The short points for
decision is the correctness of inclusion of PF and bonus in the gross consideration for
service tax . We find that the Ld. Commissioner App eal already waived the penalties
imposed on the appellants invoking the provision of Section 80 of the Finance Act,1994.
7. We find the similar issue came up for considerat ion by the tribunal in case of Neelav
Jaiswal and brother v Commissioner of Central Excis e , Allahabad-2014(34 STR 225
8. The above decision of the tribunal was also refe
rred to by the Hon’ble High Court of
Allahabad in case of HM Singh and Co. V Comissioner of Custom, Cntral Excise and
9. Considering the above discussion , we found no m erit in the present appeal and
accordingly dismiss the same.
About the Author:
Author is practicing chartered accountant in Gurga on and having specialisation in Service Tax
and Haryana VAT. He can be reached at firstname.lastname@example.org. Phone : 0124-