Case Law Details
Ernst And Young Limited Vs Additional Commissioner CGST (Delhi High Court)
In the present case, the petitioner has provided professional services in terms of the service agreements to overseas entities (EY Entities). It had issued the invoices for the said services directly to EY Entities and had received the invoiced consideration from EY Entities, in foreign convertible exchange. As stated hereinbefore, there is no dispute that the professional services were, in fact, rendered by the petitioner. The Adjudicating Authority has proceeded on the basis that since the service agreements were between EY Entities and the petitioner’s head office (E&Y Limited), the petitioner has rendered services on behalf of its head office (E&Y Limited). It reasoned that since the professional services were rendered on behalf of its head office, the same were not on the petitioner’s ‘own account’; therefore, the petitioner is an intermediary.
It is apparent that the Adjudicating Authority has interpreted the last limb of the definition of ‘intermediary’ under Section 2(13) of the IGST Act as controlling the definition of the term. We are unable to agree with this interpretation. The limb of Section 2(13) of the IGST Act reads as “but does not include a person who supplies such goods or services or both or securities on his own account” but this does not control the definition of the term ‘intermediary’; it merely restricts the main definition. The opening lines of Section 2(13) of the IGST Act expressly provides that an intermediary means a broker, agent or any other person who “arranges or facilitates supply of goods or services or both or securities between two or more persons”. The last line of the definition merely clarifies that the definition is not to be read in an expansive manner and would not include a person who supplies goods, services or securities on his own account. There may be services, which may entail outsourcing some constituent part to a third party. But that would not be construed as intermediary services, if the service provider provides services to the recipient on his own account as opposed to merely putting the third party directly in touch with the service recipient and arranging for the supply of goods or services.
Thus, even if it is accepted that the petitioner has rendered services on behalf of a third party, the same would not result in the petitioner falling within the definition of ‘intermediary’ under Section 2(13) of the IGST Act as it is the actual supplier of the professional services and has not arranged or facilitated the supply from any third party.
The assumption that the petitioner has acted as a buying and selling agent, is without any basis. The Adjudicating Authority had referred to the letter dated 04.04.2008 issued by RBI permitting E&Y Limited to open a branch office in India (that is establishing the petitioner) and further clarifying the activities that a branch office could carry on. The same included export-import of goods; rendering professional or consultancy services, carrying out research work in which the parent company is engaged, promoting technical or financial collaboration between Indian companies and parent or overseas group companies and representing the parent company in India and acting as a buying or selling agent in India. However, merely because one of the activities that could be carried on by the petitioner is to act as buying/selling agent in India does not mean that the petitioner had carried on such activities and the invoices raised were for services as a buying/selling agent. As noted above, in the facts of the present case, there is no dispute that the petitioner had, in fact, rendered professional and consultancy services, which is also one of the permissible activities.
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