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2013 (5) TMI 393 - AT - Service TaxServices received for issue of Foreign Currency Convertible Bond (FCCB) in foreign countries for raising of funds in foreign exchange needed by JLSL - service tax demanded from JLSL as a recipient of service in terms of provisions under Section 66A of Finance Act, 1994 since the service provider was located abroad - Held that:- Not in agreement with the argument of Revenue that the service of Underwriting has to be necessarily provided by merchant bankers. Also disagree that providing Underwriting Service is incidental to the services rendered as a Lead Manager to the issue. This is basically because the latter involves basically organizing an event viz. issue of the FCCBs and the former involves financial risk to the underwriters and the two matters are totally different in nature. It is not acceptable that the contract has to be considered as a whole and classified considering it as a single service and subjected it to tax. This is because the services are distinct in nature and the contract lays down the services as distinct services with separate remuneration fixed for the two services. Further if at all it is to be considered as one single bundle it is not agreeable that the dominant nature of the service is that of Lead Manager’s services, since JPMS is earning a higher commission by underwriting the issue taking the risk involved. As stated by JLSL, that the issue was wholly subscribed by JPMS, the Lead Manager service was a minimal part of the contract in this particular case. Further “Underwriting Service” is specified in a sub-clause of Section 65(105) which occurs earlier than the sub-clause in which Lead Manager’s Service occurs. So going by the criterion laid down in Section 65A(c) of Finance Act, 1994, the service will get classified under “Underwriting Services”. Therefore holding the view that the “Underwriting Service” rendered by JPMS to JLSL is distinct from the Lead Manager service provided. Since the underwriter service is to be subjected to tax under Section 66A of Finance Act 1994 taking into consideration the place of performance as per Rule 3 of Taxation of Services (Provided from Outside India and Received in India) Rules, 2006. In this case Underwriting was done outside India, thus no reason to tax the impugned service. JLSL also has a very strong case on the issue of time-bar because they had placed the entire matter before his jurisdictional officers who audited their record and they had initially opined that the tax is payable only on services relating to Lead Manager Service and the same was paid and such payment was reported in the relevant ST-3 returns. Against revenue.
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