Case Law Details
The applicant herein has entered into a Memorandum of Understanding (MoU for short) with one foreign firm IDEAS (i.e. IDEAS Management Consultants, Oman). Under that Memorandum of Understanding (MoU for short), the applicant has agreed to become a Distributor of the books of various nature which will be supplied by IDEAS (i.e. IDEAS Management Consultants, Oman) and those books will be sold to the various purchasers in India. The question which has been posed in the application is as to whether the service tax liability will be for an activity described as under:-
“proposed IDEAS Oman will be selling educational books and printed manuals for onward sale to organizations in India via Creative Problem Solving India, Mumbai.”
The applicant stresses on the wording of the proposed activity which is purely a selling activity. It is clear that the applicant will be purchasing the books from IDEAS ( i.e. IDEAS Management Consultants, Oman) and will be further selling them to the Indian entities.
The MoU also covers some other activity for which the payment is required to be made by the applicant to IDEAS. It is a simple transaction between the Distributor and IDEAS that if the Distributor comes to know about any error that shall be corrected and the extra expenditure required to be made by IDEAS would be reimbursed separately. There is no element of ‘service’ in this. According to clause 4 of the Memorandum of Understanding (MoU for short) which says:
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