Brokerage on sale of RBI bonds can't be charged to Service Tax

Brokerage on sale of RBI bonds can't be charged to Service Tax as bonds are Govt. security

[2015] 57 taxmann.com 405 (Mumbai - CESTAT)

CESTAT, MUMBAI BENCH

HDFC Bank Ltd.

v.

Commissioner of Service Tax, Mumbai

Section 65(12), read with section 66, of the Finance Act, 1994 - Taxable services - Banking and other Financial Services - Assessee-bank earned brokerage on sale of RBI Tax-saving Bonds - Department demanded service tax thereon - Assessee argued that these were 'government securities'; hence, brokerage on such 'sovereign securities' cannot be liable to service tax - HELD : Tax-savings bonds were issued as part of borrowing programme of Government from public and as per RBI letters, same were 'Government security' - CBEC Circular dated 10-8-2010 clarifies that there is no Service Tax on underwriting fee or underwriting commission received by primary dealers for dealing in Government securities - Same logic would apply in respect of brokerage also - Hence, brokerage is not liable to service tax [Paras 4.1 & 4.2] [In favour of assessee]

Circulars and Notifications : Circular No. 126/8/2010-S.T., dated 10-8-2010