By TIOL News Service

MUMBAI, JUNE 06, 2017: REVENUE is of the view that appellant pursuant to having arranged finance/loans for various borrowers received an amount from his clients, recorded in the books of accounts as commission, and the said receipt is taxable under ‘Business Auxiliary Service'.

The appellant contends that this amount received as commission is nothing but brokerage received for arranging loans to his clients.

The matter is before the CESTAT.

The Bench observed that the issue is no more res integra as the bench in the case of Fulchand Tikamchand - 2016-TIOL-502-CESTAT-MUM considered an identical issue and held thus -

"8. It is seen from the description of the activity that the appellant does not enter into any contract, written or implied, with either the financier or the borrower; nor is there any responsibility cast upon the appellant in the event of default on the part of financier or the borrower. Accordingly, the appellant fails the test of description as agency or agent for classification as commission agent under section 65(19) of Finance Act, 1994. There is no force in the argument that rendering any activity that fall in section 65(19)(vii) would classify the appellant as ‘commission agency' when section 65(19)(vii) can be invoked only in relation to the preceding sub-categories.

9. … The appellant, on the other hand, receives commission from the borrower who does not have either a product or a service to place in the market. The consideration is, thus, not connected with the sale of a product or service belonging to the person who makes over the consideration. The appellant, therefore, does not find fitment in section 65(19)(vii) as provider of ‘business auxiliary service'."

Holding that the issue is now squarely covered in favour of the appellant, the impugned order was set aside and the appeal was allowed with consequential relief.

(See 2017-TIOL-1878-CESTAT-MUM)