9911796707
TMI Blog2013 (7) TMI 151X X X X Extracts X X X X X X X X Extracts X X X X ..... income from financing of IPO and processing fees received from the Bank for the purpose of choosing a particular Bank for deposit of the IPO money. Second demand was confirmed under the category of 'Business Support Services'; amounting to Rs.3,29,410/- and penalty was confirmed under Section 78 of the Finance Act, 1994 amounting to Rs. 5.5 crores as well as Rs. 5000/-under Section 77 of the Finance Act, 1994 and interest was ordered to be levied under Section 75 of the Act towards delayed payment of Service Tax. 2. The appellant M/s JM Financial Services Pvt. Ltd. is a class I merchant banker registered with SEBI, having its registered office at Mumbai and also registered with Service Tax department. 3. As per the show-cause notice, it w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the applications in favour of the issuing company, in one of the specific banks. The appellant exercises its option by choosing a particular bank for keeping the application money, pending allotment of shares as the Lead Manager, The Bank where application money is kept with, pending allotment, is under no obligation to pay any amount to any person or the appellant depositing the money with it. The payment made by the Bank to the appellant is in the nature of reward for doing business with it or an incentive for keeping the money with them temporarily. The bank with which the money is kept, benefits by way of interest on the money available for a few days, which is payable on demand. 5.1 In the impugned order it has been held that it c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investors) to invest in the shares/debentures of the particular company. Some of the investors of the appellant require short term funding for applying in the Public Issue. The appellant has entered into an agreement with M/s JM Lease Consultant Pvt. Ltd., which is a company registered with the Reserve Bank of India as Non-Banking Financial Company (NBFC) having its main object of leasing investment and lending. As per the agreement, which is annexed as Annexure-B in the appeal memorandum, the appellant will recommend and forward the loan applications of its clients for investing to the said finance company. Further, the appellant stands guarantee for the due repayment of the loans, taken by its clients, whereas the financing company assur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the two contracting parties act on principal-to-principal basis and one does not provide service to another. Hence, in such an arrangement, the activity is not covered under Service Tax. 6.3 Having considered the rival contentions, we are of the view that no service has been rendered by the appellant to the finance company and the activity has been done on the principal-to-principal basis. Accordingly, no Service Tax is leviable on the amount received by the appellant by way of share of income from NBFC in the activity of financing. 7. Business Support Services During the period 1.5.2006 to 31.3.2008, the appellant has recovered Rs. 3,35,866/- by way or reimbursement of common expenses like electricity etc. form the other group companies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d other expenses incurred commonly by the appellant, no service can be stated to have been rendered and accordingly, the same not liable to Service Tax. 8. So far the penalties are concerned, in view of the findings recorded above, the penalties imposed under Section 77 and 78 of the Finance Act, 1994 are set aside. 9. To sum up, (i) we set aside the levy of Service Tax on the share income as the result of IOP financing received from the NBFC company. (ii) We set aside the leviability of Service Tax in respect of Processing Fee received from the Bank, (iii) We set aside the levy of Service Tax on the reimbursement of common expenses such as electricity charges, common office expenses etc., and &n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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