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Service Tax Demand Against Port Trust

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Arrangement with contracting-party a 'joint-venture'; Royalty towards port-exploitation rights not 'service' consideration - CESTAT

  • CESTAT quashes service tax demand against Port Trust in respect of leasing of land & water front to South West Port Ltd (SWPL) towards construction of jetty for purpose of loading and unloading of cargo from ocean going vessels
  • Perusing the agreement between both parties, CESTAT notes that besides leasing, assessee also granted permission to SWPL to conduct port operations and received license fees / royalty towards the same; States that arrangement between assessee & SWPL, being a public-private partnership, is in nature of joint venture whereby strategic, financial and operating decisions are to be unanimously agreed upon by both co-venturers
  • Observes, “….activities undertaken by a partner/co-venturer for the mutual benefit of the partnership/joint venture cannot be regarded as a service rendered by one person to another for consideration and therefore cannot be taxed.”
  • Holds that Explanation 3 in definition of “service” in Section 65B(44) under Negative List regime which treats unincorporated association or body of persons and members thereof as distinct persons, does not have effect of rendering activities undertaken by partner / co-venturer (that are actually for his own benefit) as being a service rendered to partnership (join venture) : Mumbai CESTAT
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Guest Wednesday, 18 September 2019

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