No Service Tax on Section 194J Income Below ₹10 Lakh Threshold Under Exemption Notification: CESTAT [Read Order]

The Principal Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), New Delhi bench, ruled that service tax is not payable on income declared under Section 194J of the Income Tax Act if the amount received is below the Rs. 10 lakh threshold as per the exemption granted under Notification No. 33/2012 dated 20.06.2012.

Stay Updated with the Latest Audit Report Formats & Audit Trials Requirements! Click here

Baakir Real Estate Private Limited, the appellant, had received Rs. 91,177 in FY 2016–17 and Rs. 2,19,099 in FY 2017–18 under Section 194J. The department alleged that these were payments for taxable services and issued a show cause notice raising a service tax demand. The Commissioner of Central Goods and Services Tax, Delhi South, confirmed the demand along with interest and penalties, invoking the extended period of limitation under Section 73(1) of the Finance Act, 1994.

Read More: Switching Jobs? Here’s Why You Must Transfer Your PF Account Every Time You Change Employers

The appellant challenged the order before CESTAT, arguing that the income was within the annual exemption limit of Rs. 10 lakhs provided under the said notification. It was further argued that the department failed to establish the taxable nature of the receipts and merely relied on TDS deductions under Section 194J to levy service tax.

The revenue counsel argued that the receipts were of a taxable nature and that the assessee had not explained their classification or non-taxability. They also argued that the exemption could not be claimed without clear disclosure and classification of the service provided.

Read More: Google’s Gemini 2.5 Pro AI can help in Smarter Tax & Finance Practice – Concepts from I/O 2025

The two-member bench comprising Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member) observed that not all income subject to TDS under Section 194J automatically attracts service tax liability. It emphasized that even if the amount was taxable, the receipts fell within the threshold exemption limit for small service providers under Notification No. 33/2012.

The tribunal held that the Commissioner’s reliance on the absence of explanation was insufficient to override the statutory exemption. It clarified that the threshold exemption applies to aggregate taxable services in a financial year, and in this case, the amounts were significantly below the Rs. 10 lakh cap.

The tribunal set aside the demand and allowed the appeal.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates