Home Case Index All Cases Service Tax Service Tax + AT Service Tax - 2016 (2) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2016 (2) TMI 221 - AT - Service TaxManagement consultancy services - Merchant Banking Services - Underwriting services - Stock broker services. - Receipt of Advisory fees, Retainership fees, Advisory fees for Mergers and Acquisitions ( hereinafter referred as M&A), fees for Merchant Banking services ( hereinafter referred as MBS), Management fees earned by appellant's subsidiary, fees for underwriting Government securities and some other minor fees. Held that:- what is to be seen is the obvious legislative intent to tax merchant banking services under the category of banking service w.e.f. 16.7.2001 and not to see any intended meaning of legislation in the definition of 'Management Consultant Service'. We hold that the MBS cannot be classified under Management Consultancy Service and therefore no service tax is payable. The fees are towards activities of financial ties/private placement, financial valuation services etc. We find these activities to be squarely covered under the definition of Banking and other Financial Services and therefore our views given above in the case of Merchant Banking Services would hold in this case also. The third category of service which have been classified under the Management Consultancy Service is the fees earned by the subsidiary of the appellant. We find that it has not been controverted by the department with any evidence that the payment is received in respect of activities undertaken by their subsidiary. The subsidiary is a separate legal entity under the Companies Act. The fees earned is not the income of the appellant company. Merely because the income is shown in the consolidated financial statement of the company and its subsidiary, the same cannot be a ground for demanding service tax from the company. Services in relation to software development projects - The service that is Information Technology Service was specifically excluded from the scope of 'Business Auxiliary Service(BAS). Both these facts indicate Government’s intention to classify the service under Gonsulting Engineer Service' or under BAS. Therefore we are inclined to give the benefit to the appellant and hold that service tax is not payable on the service in question under Management Consultant Service. The concept of Management Consultancy is clearly consultancy and technical assistance in the running of the affairs of an organization. The definition itself refers to various aspects of the working system of any organization. Whereas Mergers and Acquisitions is a highly technical and restrictive term. Mergers refer to the mergers of organizations. Similarly, the word 'acquisition' refers to acquisition of another entity by a company. Mergers and acquisitions cannot be related to the running of the affairs of an organization. If such a wide view is taken then, as stated by the learned Counsel, specific service entries in the Finance Act, 1994 such as practicing Chartered Accountants [Section 65 (83)], Cost Accountants [Section 65(84)], and Secretaries [Section65(85)] would all get covered under the definition of 'Management Consultancy Service'. It would render many entries otiose. The legal position is that an interpretation of the scope of an entry should not be such which will lead to an illogical situation and lead to unnecessary complexity. The legislative intent should not be negated as held by the Apex Court in the case of Balaji Enterprises [1997 (5) TMI 108 - SUPREME COURT OF INDIA]. We respectfully follow the High Court judgment in the case Indian National Shipowners Association [2009 (12) TMI 850 - SUPREME COURT OF INDIA]. The new entry of Mergers and Acquisitions extends the coverage of service tax and is not the result of carving out a new entry from the Management Consultancy Service. Consequently we hold that service tax is not payable on M&A Services prior to 16.7.2001 under the category of “Management Consultancy Service”. Demand set aside - Decided in favor of assessee.
|