Linde Engineering India Pvt. Ltd. Versus Union of India – Gujarat High Court
Facts in Brief
The Indian company (here it is the subsidiary company) is engaged in providing taxable output services under the category of consulting engineering services, commissioning and installation services, construction services other than for residential complexes etc. to various entities located in and outside India. Further, the company has also entered an agreement with its holding company (here it is the parent company) which is incorporated in Germany to provide consulting engineering services.
Question for Consideration:
- Whether the parent and subsidiary company can be considered as merely establishments of distinct persons as per Explanation 3 to Section 65B(44) of the Finance Act, 1994 or not?
- Whether the consulting engineering services provided by the Indian Company to the foreign parent company would qualify as export of services as per Rule 6A of the Service Tax Rules, 1994 or not?
Section 2(6) of IGST Act, 2017 defines export of services
“export of services” means the supply of any service when, ––
- the supplier of service is located in India;
- the recipient of service is located outside India;
- the place of supply of service is outside India;
- the payment for such service has been received by the supplier of service in convertible foreign exchange; and
- the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in section 8;
Decision of the Court:
- The Hon’ble Gujarat High Court held that the services rendered by Indian company to its foreign parent company, registered in non-taxable territory i.e. in Germany, was services rendered to a separate legal entity. Therefore, it cannot be considered that both companies are merely establishments of distinct persons under Finance Act, 1994.
- Accordingly, the Indian company fulfils all the conditions as provided under Rule 6A of Service Tax Rules, 1994 and therefore, the services provided by Indian company qualify as export of services.
In the case of Linde Engineering India Pvt. Ltd. versus Union of India, the Gujarat High Court concluded that the Indian company and its foreign parent company are separate legal entities, not merely establishments of distinct persons. Therefore, the services provided by the Indian company to its foreign parent company qualify as export of services, fulfilling the conditions under Rule 6A of the Service Tax Rules, 1994.
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