CAs, architects to pay service tax: SC | india | Hindustan Times
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CAs, architects to pay service tax: SC

india Updated: Aug 23, 2007 04:06 IST
Bhadra Sinha
Bhadra Sinha
Hindustan Times
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The Supreme Court on Wednesday upheld the Parliament’s legislative competence to levy service tax on chartered accountants, cost accountants and architects.



Rejecting the contention of All India Federation of Tax Practitioners, a bench of Justice SH Kapadia and Justice B Sudershan Reddy said, “Service tax is a tax on each activity undertaken by a chartered accountant, a cost accountant or an architect. For each transaction or a contract, they render professional-based services.”



The bench further observed that although from the point of view from these professionals the activity undertaken by them is based on their performance but, from a client’s perspective, they are service providers. While upholding the Central


Government’s law to levy service tax through Finance Act 1994 and 1998 the bench also distinguished between a service tax and a professional tax. Rejecting the appellant’s argument that the word “profession” was synonymous with the word “service,” the bench held that service tax and professional tax were distinct.



Professional tax, according to the court, is a tax on an individual, person, a firm or a company. And, therefore, the state legislature was entitled to levy the same. However, service tax was a tax on the “status of a cost accountant or a chartered accountant.”



“As long as a person remains in the profession, he has to pay professional tax. That tax has nothing to do with the commercial transaction he undertakes for his client. Even if he has no work through the year, still he has to pay professional tax,” the bench said. However, service tax was levied on each contract and same cannot be levied under the Finance Act without service being provided.



The SC’s ruling came on an appeal by All India Federation of Tax Practitioners who challenged a Bombay High Court judgement upholding the legislative competence of the Parliament to levy service tax on these professionals.