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Striking Down of Circular on Taxability of Annuities – HAM Projects – Karnataka High Court in DPJ Bidar – Chincoholi & Others - Circular 150/06/2021
In our earlier article[1], we have discussed the issue on taxability of annuities received in a Hybrid Annuity Model. This is the update to the earlier article after the recent judgment of Honourable Karnataka High Court in the matter of DPJ Bidar – Chincholi (Annuity) Road Project Private Limited has quashed the impugned circular which tried to levy the tax on annuity payments. In this article, we deal with the issue involved and the analyse the judgment of High Court.
Introduction:
The construction of road is quintessentially a primary infrastructure and boost to the national infrastructure. The construction of road and maintenance thereof, is one of the important factors to boost the national income and economic productivity. The taxation of construction of road under the service tax regime was completely exempted from tax. Though, there was a lot of confusion on the taxation of maintenance of roads under the service tax regime, the ambiguity was put into rest by creating a specific entry for exemption. This was a huge relief to the sector and the service providers, considering the huge stakes of demands.