Services Received by CA Firm from their Associated Firm Abroad Taxable under RCM: CESTAT [Read Order]

The Hyderabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), while considering an appeal filed by Pricewaterhouse, has held that that the services rendered by a CA firm in India to their foreign Associate Firm would be subject to Service Tax under Reverse Charge Mechanism.

In the instant case, the appellant is a Chartered Accountancy firm rendering services in India. It had taken help from the associate concern from abroad, i.e, PricewaterhouseCoopers USA and U.K and paid the fees to them. The department held that the services which were received by the appellant from their associated firm would amount import of service and hence the service tax was demanded from the appellant under reverse charge mechanism.

The appellant claimed that they are not covered under the definition of ‘chartered accountant services’ for the amounts repatriated by them to PricewaterhouseCoopers USA and U.K.

The Tribunal noted that the definitions includes any concern engaged apart from Chartered Accountants who is a Member of Institute of Chartered Accountants of India and holding a practice granted under the provisions of Chartered Accountants Act also includes any concern engaged in rendering services in the field of chartered accountancy.

It was noted that though the definition, at the first blush looked very attractive and impressive, but on deeper perusal it is seen that the term ‘practicing chartered accountant’ service has been defined in the Act and latter part “includes any concern engaged in rendering the services in the field of chartered accountancy”.

“Thus, the definition is an inclusive one and a very wide inasmuch as it includes any concern rendering services in the field of chartered accountancy. In the case in hand, it is undisputed that appellant herein had availed the services rendered by PricewaterhouseCoopers USA and U.K, in the areas of accounting and auditing and various other functions related to chartered accountant services. In our view, the definition of practicing chartered accountant, the emphasis is on the membership of Institute of Chartered Accountants of India and certificate of practice granted under the provisions of Chartered Accountants Act, 1949 (38 of 1949) may not apply to the appellant as the second part i.e. inclusive part is emphasizing on independent concern engaged in rendering chartered accountancy services. It can be noted that the second part of the definition does not talk about requirement of the concern being Indian or otherwise. So, in our view, it applies to all concerns whether it is in India or abroad. Further, in our view, if the associated concern is situated abroad and engaged in rendering services in the field of chartered accountancy, will get covered under the definition of ‘practicing of chartered accountants’.”