Consolidated contract of sponsorship & % sharing of profit

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M.K. Madan (Querist)
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21 December 2012 Ours is a pvt ltd. company.we have entered into a consolidated contract with an athlete for sponsorship.in lieu of his sponsorship service we shall be making a fixed payment to him plus a % share in profit from increased sales.It is known to us that the the company is liable to pay service tax under reverse charge on the fixed amount paid but whether the profit sharing will also be liable to service tax?please clarify.

Kaushik Vinod

Kaushik Vinod (Expert)
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25 December 2012 Hi Madan,

service" means any activity carried out by a person for another for consideration, and includes a declared service, but shall not include ( A list is given) Section 65B(44)of Finance Act.
Consideration has not been defined in Service tax Law but the reference has made to Indian Contract Act,1872.
The profits received for performing service is taxable and the same has been also explained in the guidance note of the CBEC.

Thanks

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