2017 (1) TMI 610 - AT - Service Tax

Business Auxiliary Services - loan fee for arranging loans - brokerage for enabling distribution of IPO - reimbursable expenses - Held that - as regards loan fee, examining the scope of service rendered by the appellant, we find this category has no connection to such services. There is neither an advisory role nor auxiliary financial service with reference to investment etc. We further note that the impugned order mentioned about other financial services which were added under the category of BOFS only w.e.f. 18.04.2006. Even such other financial services appear to have no application to the present case. Regarding the brokerage fee, we find the same cannot be covered under Business Auxiliary Service during the relevant time. The services Registrar to an issue and share transfer agent more appropriately deal with the services rendered by the appellant. These taxable services were introduced only w.e.f. 01.05.2006 whereas, the demand in the present case is for the period prior to that date - since the tax liability under BAS itself is found to be not tenable, the inclusion of reimbursable expenditure for such tax does not arise. Demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Taxability of loan fee received for arranging loans
2. Taxability of brokerage received for distributing IPO
3. Inclusion of reimbursable expenditure towards stationary, telephone, postage for taxation

Analysis:
1. The appeal challenged the order of the Commissioner (Appeals) regarding the taxability of the loan fee received by the appellants for arranging loans for clients. The appellant argued that the services provided did not fall under the definition of "Banking and other Financial Services" applicable during the relevant period. The Tribunal examined the scope of services rendered and found that the services did not align with the categories mentioned under advisory and auxiliary financial services. The order mentioned that the services taxed were advisory and other auxiliary financial services, which did not apply to the appellant's case. The Tribunal concluded that the demand on the loan fee was not justifiable and set aside the impugned order.

2. The dispute also involved the tax liability on the brokerage received by the appellants for distributing IPO for clients. The Tribunal determined that this amount could not be covered under Business Auxiliary Service during the relevant period. Referring to previous decisions, the Tribunal highlighted that services like "Registrar to an issue" and "share transfer agent" were more suitable for the services rendered by the appellant. These taxable services were introduced after the period in question. Therefore, the Tribunal found that the tax liability on these accounts was not justified, leading to the allowance of the appeal.

3. Lastly, the inclusion of reimbursable expenditure towards stationary, telephone, postage for taxation was also a point of contention. Since the tax liability under Business Auxiliary Service was deemed not tenable by the Tribunal, the inclusion of reimbursable expenditure for taxation did not arise. The impugned order was set aside based on the analysis and discussion of the issues presented, ultimately allowing the appeal.