Shyam Lal Naik (Service) 16 March 2009

Interpretion of Agreements

Dear Members,

I seek your valued opinion on the following.

There are two contracting parties, say X Ltd. and Y Ltd. X Ltd outsources some activities to Y Ltd. The activities are taxable services under Service Tax Laws. The agreement contains a clause that agreed rate is inclusive of all taxes.

How ever, while entering into the contract, both the parties were under bonafide belief that Service Tax is not applicable.

Whether, considering the bonafide belief of the contracting parties, it cna be construed that the agreed rate is exclusive of Service Tax. Is there any decided case on such issue?

Reply Follow

1 Replies

Manish Singh (Advocate) 16 March 2009

if you have evidence to show or the other party agrees to, that the same was not agreed by the parties, then the clause may be amended to that extent having suly signed by the parties. otherwise it shall be construed as being inclusive of service tax also .