No Service Tax Applicable on any remuneration received by a partner of a partnership firm

Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has pronounced that no Service Tax Applicable on any remuneration received by a partner of a partnership firm. The Tribunal said that the partner of a partnership firm is none other than the same, therefore, one would not provide service to oneself. As there is no recipient of service, in this case, no service has been provided by the appellant.

The appellants are the partners of the partnership firm namely M/s. Ernst & Young, LLP. The appellants had filed their income tax returns showing components such as ‘sale of services’, against which partners have shown a certain amount received from the partnership firm as their income. The said income tax returns were supplied to the authorities below, who after examining the same raised a query to the appellants, why not on account of sale of service be taxed under the Finance Act, The appellants replied to the queries but authorities below confirmed the demands on account of service tax payable by the appellants. Aggrieved by the said orders, the appellants are before CESTAT.

The learned counsel Shri Prasad Paranjape, Advocate appearing on behalf of the appellants submitted that appellants are partners of partnership firm and they received certain remuneration and distribution of profit and the same amount is shown as profit in their income tax returns. The said amount is nothing but a remuneration received as a partner of the partnership firm and they have not provided any service to anybody else except to their partnership for which they are the owners.

After hearing learned counsel for the parties and on due consideration, the tribunal set aside and quash the impugned Service Tax show cause-cum-demand notice