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TMI BlogSERVICE TAX TERMINOLOGY – PART-VI.X X X X Extracts X X X X X X X X Extracts X X X X ..... SERVICE TAX TERMINOLOGY – PART-VI. X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Money should be a legal tender and need not necessarily be Indian legal tender. The instrument of money such as cheque, bill of exchange or any similar instrument may be used for any purpose including its use as a consideration to settle any transaction or an obligation or exchange with Indian or any legal tender of same or another denomination. The following definition of 'money' as it exist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed prior to Finance Act, 2012 in explanation (b) to section 67 has been omitted by the Finance Act, 2012- "Money includes any currency, cheque, promissory note, letter of credit, draft, pay order, travellers cheques, money order, postal remittance and other similar instruments but does not include currency that is held for its numismatic value". The new definition is much wider in scope and incl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udes electronic remittance as well as other instruments used as consideration to settle an obligation or exchange with any legal tender of another denomination. The kind of transactions in money would cover the following transactions - * Deposits in or withdrawals from a bank account. * Advancement or repayment of principal sum on loan to someone. * Conversion of Rs 1,000 currency note into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one rupee coins to the extent amount is received in money form. Interest Interest has been defined as under - 'interest' means interest payable in any manner in respect of any money borrowed or debt incurred (including a deposit , claim or other similar right or obligation) but does not include any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any credit facility which has not been utilized. It should only be in the form of interest and does not include any service charge, fee or other charge, by whatever name called. For example, processing charges, pre-payment fee, late fee, cheque bounce charges etc. will not be called interest. Also such 'interest' has to be paid or received in relation to - * Money borrowed * Debt incurred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... * Deposit * Claim or other similar right or obligation However, in section 2 (28A) of Income Tax Act, 1961, the expression 'interest' has been defined to mean interest payable in any manner in respect of any money borrowed or debt incurred (including a deposit claim or other similar right or obligation) and includes any service, fee or other charge in respect of the moneys borrowed or debt incu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred in respect of any credit facility which has not been utilized.
Thus, there is a vast difference in scope of ' interest' in direct tax and service tax. In service tax, scope of interest has been limited to restrict inclusion of fee, service charge or other charges.
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