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Service Tax on Individual lawyers stayed by Delhi High Court

Delhi High Court today (Friday - 29.4.2011) stayed the Notification levying service tax on representational services rendered by individual lawyers to business entities, till further orders and fixed the next date of hearing on 23.5.2011, with directions to UOI to file counter in a fortnight. The stay was given in response to Writ Petition filed in the Delhi High Court bearing WP No. 2792 of 2011 by Delhi Bar Association to challenge the levy of service-tax on “Legal Consultancy Services”.

Delhi High Court today (Friday – 29.4.2011) stayed the Notification levying service tax on representational services rendered by individual lawyers to business entities, till further orders and fixed the next date of hearing on 23.5.2011, with directions to UOI to file counter in a fortnight.

The stay was given in response to  Writ Petition filed in the Delhi High Court bearing WP No. 2792 of 2011 by Delhi Bar Association to challenge the levy of service-tax on “Legal Consultancy Services”.

The Court also frowned upon the unusually short transition period given in the notification dated 27th April, 2011, making it effective from 1.5.2011, hardly providing sufficient time to switch over to new accounting systems and to seek registration.

The case was ably argued by President of Delhi Bar Association & ASG Senior Advocate Mr. Chandiok for the lawyers community, and by Sr. Counsel Mr. Ganesh who has emerged as the focal point of resistance against irrational levy of service tax elsewhere, on a petition filed by a team of two dynamic young lawyers Sumit Batra and Ruchir Bhatia.

Rakesh Chitkara, Advocate,
9899998663 / 9891678009

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Reports From PTI

HC stays Centre”s notification levying service tax on lawyers

In a major relief to lawyers, the Delhi High Court today stayed the operation of a central government”s notification to levy service tax from practising advocates.

“The notification is stayed,” a bench comprising Chief Justice Dipak Misra and Sanjiv Khanna said on a petition by Delhi High Court Bar Association (DHCBA) challenging the Centre”s notification.

Admitting the petition of DHCBA, filed by its secretary Kirti Uppal, the bench asked the union government and the Central Board of Excise and Customs to file its response within two weeks. The next hearing has been fixed for May 23.

The government had on April 25 notified the Legal Practitioners Bill, 2010, for imposing 10 per cent tax on the fee charged by lawyers for their legal services. The bill was to be implemented from May 1.

Lawyers in the Delhi High Court and all the six Delhi districts courts had observed a day-long strike on March 24, when the bill was passed in Parliament, to protest the Finance Bill proposing levy of 10 per cent tax on the fee charged by them for rendering legal services to their clients.

Delhi Bar Association President Rajiv Khosla had said lawyers are against imposition of service tax on their profession and on services rendered by them to the firms and companies, besides the services given by legal firms to individuals

Related Post:-

Guwahati High Court stays notification levying service tax on lawyers

Andhra Pradesh High Court stays Service Tax On Lawyers

Categories: Service Tax

View Comments (5)

  • The simple matter is government of india is busy leving service tax on every service except the employees.There is no fundamental logic is levying two taxes on one person income tax and service tax.There is a slight difference between the two.Yet it is very much cumbersome and difficult for a person two pay two type of taxes .Government must combine these two taxes either levy income tax or service tax.It would save time of both govt. and tax payees .also there would be less litigation and less govt.employees would be needed.A suitable rate can be detremined by the govt. for its requirement.Service tax or income tax both make responsible only the service provider.Hence the concept that it is levied on clients is true only to the extent that it increases the cost of service.

  • It appears the intention of the Govt in levying service tax on legal professionals that they should act as business entity, coming to the office first prepare service tax, TDS challns, file Service tax returns and TDS returns every quaurter as of now and later every week and not to prepare himself for cases to argue or assist the court in delivering justice. Burdening an individual lawyer with so many levys, profession tax by state government, income tax with TDS compliances, now alas, with service tax. Now you have to calculate from each and every bill or receipt, the tax to be deducted at source by the payers(because many tax payaers are not aware with such provisions and deduct only when there autditors are pointed out that in many cases after the completion of financial year, such deductions first you have to remimburse and then claim, generally this is done by BANKs and then fight with the department for refund, unless the TDS and income are related in the same year, department will not grant refunds, hence you have to educate them when fee is paid) in the same way service tax rigour you have to face. Thereafter, the same system of assessment, reassessment, revision, interest, penalty and proseuction etc., . Can all these be borne by ONE INDIVIDUAL who is carrying on profession. Should this be a punishment for legal professionals who intends to maintain his accounts. LET US pray this type of provisions are struck down by Hon'ble Courts in order to help legal feternity especially INDIVIDUALS in profession to concentrate more on profession and justify their work. Legal profession unfortunately the LAW MAKERS thought a business and comes just with investment. Why should they reduce income tax rates and say it is moderate, is it to bring another levy in the form of service tax. Burdening more and more with the statuory levies on individuals professionals more damage is proposed, if possible let the burden of TDS be reduced.

    • Lawyers are not different in any way from any other professional. Every professional who is busy will these obligations for compliances very taxing. Be it a chartered accountant or company secretary or doctor! Therefore levy of service tax on services rendered by lawyers cannot be the plank of argument; dont levy service tax on services rendered by any of the professionals, whether they are practising as a Firm or otherwise. If service tax could be collected and paid by a company secretary every day, why not a lawyer! A CA or CS also argues in tribunals everyday and he too prepares his brief and arguments! There should not be any discrimination between these profssionals!

  • How does it affect the arbitrators? They do quasi judicial work and have no client as such to provide any service to him. Would anybody please clarify the position?

  • The compliance burden of various tax and other laws is killing. More than 10 lakh SSI units have close be: 2000-2009, and 80 percent because of the compliance issues. Blind aping of the laws of the west is putting our country in a position, whereby small and micro enterprise is getting killed and only corporate can survive or thrive. The small professionals will soon become paid employees of big hospitals, big fours of consulting or big legal firms. In 1990 we had only one service tax now lawyers and other professionals have to cope up with tow taxes and much higher compliance costs of engaging atleast one more accountant out of our receipts, which burden for a smaller professional is more than the tax itself. By the way what happened on 23 May,2011 in Delhi H.C. Any feedback on that.

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