The selling shareholders are not liable for service tax liability under the share purchase agreement read with the arbitral award: Sahara spokesperson

The Sahara Group has raised the pitch in the Rs100 crore service tax issue with Jet Airways (India) Ltd over the erstwhile Air Sahara by saying it is not liable to pay the tax as it no longer owns the airline.

Jet Airways, Indias largest private airline, said on Wednesday the Directorate General of Central Excise Intelligences inquiry into the non-payment of service tax relates to a time before it bought Air Sahara in April last year, and the onus rests with the earlier owners.
The selling shareholders are not liable for service tax liability under the share purchase agreement read with the arbitral award, said a Sahara Group spokesperson, declining to be named.

Akil Hirani, managing partner of legal firm Majmudar and Co., said the share purchase agreement between Jet Airways and Sahara Group does not provide for earlier tax liabilities. Thus, in the absence of any provisions in the share purchase agreement in respect of prior tax liabilities... Jet Airways will be liable for service tax and other tax liabilities for periods prior to April 2007, Hirani said.

Gautam Nayak, partner of chartered accountancy firm Contractor, Nayak and Kishnadwala, said the service-tax liability will be on Jet Airways if it had not made special provisions to do away with such payments in the share purchase agreement.

Mumbai-based Jet Airways bought 100% equity in Sahara Airlines for Rs1,450 crore. Shares of Jet Airways closed at Rs540.85 on the BSE from its previous close of Rs538.65 on Thursday.