Income Tax Judgements Supreme Court

Supreme Court Stays Imposition of Service Tax on Lawyers

Bombay Bar Association Vs UOI (Supreme Court)

Supreme Court Stays Imposition of Service Tax on Lawyers

Court: Supreme Court
Coram: Amitava Roy J, Arun Mishra J, Chief Justice
Section: Service Tax Act
Genre: Domestic Tax
Catch words: Advocates, Service Tax
Counsel: K. K. Venugopal
Date: August 10, 2015 (Date of pronouncement)
Date: August 13, 2015 (Date of publication)
AY:
File: Click here to download the file in PDF format
Citation:
Interim stay of the operation and implementation of the judgement of the Bombay High Court upholding the constitutional validity of service Tax on lawyers granted

In P. C. Joshi vs. UOI, a Writ Petition was filed in the Bombay High Court to challenge the levy of Service Tax on Advocates. It was claimed that an advocate renders services which cannot be said to be commercial or business like. They cannot be equated with the service providers mentioned in the Finance Act 1994. It was also contended that advocacy is not a business but a profession and a noble one. An advocate is a part and parcel of the administration of justice and which is a sovereign or legal function and hence providing for a Service Tax on advocates would mean that their services will no longer be available or accessible to those seeking justice from a Court of law. That would defeat the constitutional guarantee of free, fair and impartial justice. The High Court dismissed the Petition and held that levy of service-tax on lawyers is valid. On appeal to the Supreme Court HELD by an interim order:

Until further orders, there shall be interim stay of the operation and implementation of the impugned final order and judgment passed by the High Court of Judicature at Bombay in W.P.(L) No.1764 of 2011, dated 15.12.2014.

The Bombay Bar Association has challenged order as well as the provision of Sub-clause (zzzzm) of clause (105) to Section 65 of the Finance Act, 1994, which was inserted by the Finance Act, 2011.

Few of the  prominent questions of law, amongst others,  as framed before SC are as below:

Whether the relationship between an advocate and a litigant is that of a provider and a service recipient or whether the relationship is that of  a representative and a litigant ?

Whether the impugned judgment is correct and legal in as much as levy of service tax on the provision of assistance to the court would hit the provision of justice either by the individual or a business entity as both are indisputably guaranteed under right to justice in terms of Article 21 read with Article 39A of the Constitution ?

Bombay High Court 

It is pertinent to note that Bombay High Court while dismissing the petition held that

“the   taxable   service   means   any   service provided or to be provided   to   any   person,   by   a   business entity, in relation to advice, consultancy and assistance in any branch of law, in any manner.”

“legislature by inserting such provision has neither interfered with the role and function of an advocate nor has it made any inroad and interference in the constitutional guarantee of justice to all.  The services provided to an individual client by an individual advocate continues to be exempted from the purview of the Finance Act and consequently Service Tax but when an individual advocate provides service or agrees to provide services to any business entity located in the taxable territory, then, he is included and liable to pay Service Tax.’ The judgment also notes, ‘The Advocates and legal practitioners are known to pay professional taxes   and   taxes   on   their   income.     They   are   also   brought   within   the purview of service tax because their activities in legal field are expanding in the age of globalization, liberalization and privatization. They are not only catering to individuals but business entities.”

Also Read: Levy of Service Tax on Advocates is Constitutional – P. C. Joshi Vs UOI (Bombay High Court) 

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