Dear Members,
I have another question on applicability of Service Tax
Some organisations create Chairs after the donors name eg. ICRIER has a chair called Infosys Chair for …..
Could you advise treatment of such donations ? Service tax ?
Best,
Wikky Katyal
Dear Wikky,
S. 65(99a) of Finance Act 1994 defines sponsorship” includes naming an event after the sponsor, displaying the sponsor’s company logo or trading name, giving the sponsor exclusive or priority booking rights, sponsoring prizes or trophies for competition; but does not include any financial or other support in the form of donations or gifts, given by the donors subject to the condition that the service provider is under no obligation to provide anything in return to such donors.
From the above definition, one will need to examine what is the obligation of Service provider (i.e. say ICRIER in the case you have mentioned). If from the overall contract one could argue that the purpose is financial support to the NGO for fulfilling certain allustric purposes, it would be regarded as donation, and out of ambit of Service Tax. However if one argues that Infosys gets certain services, say undertaking research benefit of which is made available to Infosys, then one would need to take a call if this forms a service and service tax would become applicable. Another important factor which could play a part in this would be ‘is the amount for this service has been decided by ICRIER’.
Since sponsorship is covered under Reverse Charge mechanism, service tax if payable would be payable by Infosys and not ICRIER, since Infosys is receiving service and would need to pay Service tax.