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TMI BlogSec. 37B order - Service Tax — Services rendered in respect of merger and acquisition are taxable seX X X X Extracts X X X X X X X X Extracts X X X X ..... "management consultant". 2. In response to a public notice issued on 15th February, 2001, by the Central Board of Excise and Customs, the trade and other agencies have represented that services provided in respect of merger and acquisition is in the nature of financial advisory services and is not a management consultancy service. It is stated that services provided by them involves, inter alia, analysis of business opportunities for merger or acquisition, valuation of target companies, transaction structuring, negotiating, documentation and compliance with the regulations for effecting a buy or sale transaction. Acquisition or divesting of share holdings is purely a financial transaction and are distinct from the advice or service provid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efficiencies and to capture synergies in one or more functional area such as marketing, manufacturing, R D or finance. Similarly, companies undertake divestiture transaction to withdraw from business areas with weak competitive positions or to reduce the losses/costs. From the above, it appears that merger, acquisition or other forms of restructuring have emerged as key element in management of modern business organisation. 5 The merger and advisory services rendered by any adviser or consultant may include one or more of the following specific components or activities. These may either be on the buy-side transaction assisting companies to acquire or on the sell-side assisting companies to divest, resulting into merger, acquisition or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in the nature of providing an advice, assistance in the financial management of an organisation resulting into merger, acquisition or other form of financial or organisational restructuring of a company. The nature of services provided by an adviser/consultant vary depending upon the contractual obligation and the legal compliance under various regulations governing such transactions. However, these factors in no way change the nature of service provided by such service provider. Accordingly, they appear to be providing service in relation to management of an organisation. 7. In this regard, the Board had consulted the Indian Institute of Management, Ahmedabad for obtaining an expert opinion on the subject matter. They have opined that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tices and profiles of practicing management consultants they have concluded the following: (i) the term 'management' is a broad term to cover the various functions and the multifarious activities required for its efficient and effective functioning; (ii) management consulting is not restricted, but is wide enough to include advisory services rendered on any aspect of management; (iii) merger and acquisition are an important aspect of management of any organisation today; and (iv) advisory services, including financial advisory services, for merger and acquisition clearly fall with in the realm of management consulting. It is also stated by them that even though merger and acquisition is provided by a variety of agencies, known as investment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the advisee company, then such services will not be covered under the scope of 'management consultant'. 10. Now, therefore in exercise of the powers conferred under Section 37B of the Central Excise Act, 1944, (as made applicable to service tax by Section 83 of the Finance Act, 1994) the Board hereby clarifies that any services rendered in relation to merger and acquisition will be covered under the scope of taxable services provided by "management consultant" and these services will be liable to service tax accordingly. 11. It is further clarified that certain agencies such as merchant banks who are required to play only a statutory role under any act or regulation such as Takeover Regulations of SEBI, and do not provide any advice o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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