2017 (5) TMI 960 - AT - Service Tax

Business Auxiliary Services - service as a financial broker by providing arrangement - receipt of commission for providing the platform for loan transaction between the lender and the borrower - taxability - Held that - promotion or marketing of service provided by client and procurement of service for the client are mentioned as category of activities taxable under BAS - the borrower pays a certain portion of money borrowed, as commission - The commission is received by them in the financial transaction where they acted as middle man/facilitator. - demand upheld - appeal dismissed - decided against assessee.

Summary

Issues:
Service tax liability on commission received by financial broker for providing loan arrangement services.

Analysis:
The appeal was filed against the order of the Commissioner (Appeals) regarding the service tax liability of the appellants who provided services as a financial broker by arranging loans, receiving commission for their services. The issue revolved around whether the commission received by the appellants was taxable under Business Auxiliary Services (BAS) as per Section 65(19) of the Finance Act, 1994. The Original Authority confirmed the service tax liability and imposed penalties. On appeal, the Commissioner (Appeals) upheld the original order.

The appellant argued that they did not receive any consideration from the money lender and, therefore, the tax liability was not legally sustainable as they did not promote their services to the lender. On the other hand, the Authorized Representative contended that by acting as a middleman, the appellant provided services benefiting both the lender and the borrower, thus promoting their activity. The borrower received financial services facilitated by the appellant.

After hearing both sides and examining the appeal records, the Tribunal found that the facts were undisputed. The appellants received commission from the borrower in a financial transaction where they acted as a middleman. The Tribunal referred to the statutory definition of BAS, which includes activities like promotion or marketing of services provided by the client and procurement of services for the client. As the arrangement benefited both the lender and borrower, with the commission being received from the borrower, it was held that the commission received by the appellants fell under BAS and was taxable. Therefore, the Tribunal dismissed the appeal, affirming the findings of the lower Authorities.

In conclusion, the Tribunal upheld the service tax liability on the commission received by the financial broker for providing loan arrangement services, considering the activities as falling under Business Auxiliary Services as per the statutory definition. The appeal was dismissed, and the original order confirming the tax liability was upheld.