Interpretation of Law / Statute

This query is : Resolved

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14 February 2011 I am repeating here under few provisions of Finance Act, 1994 and other statutes as under :-

Sec. 65 of the Finance Act, 1994 (Relevant to Servicetax) reads as under :-

65. In this chapter, unless the context otherwise requires,-

(12) ”banking and other financial services” means –

(a) the following services provided by a banking company or a financial institution including a non-banking financial company or any other body corporate or (Up to 31.05.2007) any other person, namely :-

(i) financial leasing services ………………………and so on …………

(14) “ body corporate” has the meaning assigned to it in clause (7) of Section 2 of the Companies Act, 1956.

(12)(105) “taxable service” means any service provided or to be provided –

(zm) to a customer / to any person (now) by a banking company or a financial institution including a non-banking financial company or any other body corporate or (Up to 31.05.2007) any other person , in relation to banking and other financial services.

Sec 2(7) of the Companies Act- “body corporate” includes a company incorporated outside India but does not include –
(a) corporate sole;
(b) a co-operative society registered under any law relating to co-operative societies and
(c) any other body corporate (not being a banking company………..)

Query - On the basis of above definitions, (1) Whether a co-operative bank (co-operative society) is out of definition of body corporate and the co-operative society is exempted from service tax being a body corporate so far as banking services are concerned by exclusion through definition or
(2) Is it covered by terms ‘any other person’ or ‘commercial concern’ and liable for service tax..

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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15 February 2011 Co-Operative banks are not covered under the definition of banking company as defined under section 5(c) of Banking Regulation Act.
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Section 3 of the Banking Regulation Act provides that the said act has limited application to co-operative societies confining to the extent mentioned in chapter V of that act.
As such the expression of opinion in Query No 1 is quite logical.
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Though a co-operative bank is not a 'banking company' yet it falls under the category 'any other commercial concern' due to the very reason of existence of motive to earn profit.
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So the answer of your Query No (2) is affirmative.
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Guest

Guest (Querist)

15 February 2011 As per the co-perative law as well as as per constitution of the Co-operative bank, it is body corporate. Therefore, no doubt, it is not a banking company but at the same time, it is a body corporate and it is an undisputed fact that a co-operative bank is a body corporate. If you are also agree for body corporate, what will be your opinion now?

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CA PARAS BAFNA

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15 February 2011 Dear Sir,

The issue may be discussed on the following
points-

1. Whether Co-Operative Banks, registered as Co-Operative Societies are Body Corporate?

Ans. I agree expert Shri K. C. Moondra.
As per the co-perative law as well as as per constitution of the Co-operative bank, it is body corporate. Therefore, no doubt, it is not a banking company but at the same time, it is a body corporate and it is an undisputed fact that a co-operative bank is a body corporate.

Guest

Guest (Querist)

15 February 2011 Dear Bafna Ji,

For convenience, I have modified the query. It is undisputed that the co-operative society is a 'Body Corporate'. Therefore, It can not be taxed as "Any Other Person'. What is your opinion Sir ?

CA PARAS BAFNA

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15 February 2011 (As I agree for "body corporate" Now I have to express my opinion)

2.1. Whether Co-Operative Banks, registered as Co-Operative Societies are Body Corporate
U/s 65(12) of the Finance Act?

Ans. No.
Because, here meaning of body corporate is
as defined in Section 2(7) of the Companies Act. ( Via -clause/ss (14) I reached the destination))

Section 2(7) is an inclusive section but its specific exclusion is significant.
which reads as under -
Sec 2(7) of the Companies Act-
“body corporate” includes a company incorporated outside India but does not include –
(b) a co-operative society registered under any law relating to co-operative societies .......and

Guest

Guest (Querist)

15 February 2011 Yes Sir,

I agree that Co-operative society has been excluded from the definition of 'body corporate' through definition given in Companies Act. Can a co-operative society (though it is body corporate) excluded/ exempted from the definition of body corporate, be taxed as 'Any Other Person'?

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Guest

Guest (Querist)

15 February 2011 My query is still open

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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15 February 2011 Sir, for Service tax purpose if any
specific meaning or definition has been assigned, then that will prevail over any other general meaning or definition.
In the specific defintion Co-Operative Banks have been excluded from the definition or meaning of a Body-Corporate.

Guest

Guest (Querist)

15 February 2011 In my opinion, it can not be taxed as 'any other person' because it has been exempted through definition as a body corporate. What do you think Sir ?

CA PARAS BAFNA

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15 February 2011 Q.3. How and under which clause service tax can be levied upon Co-Operative Banks ?

Ans> As the Co-Operative banks do not fall under the category of a body corporate, as defined under the Finance Act, these are covered under "any commercial concern".
As activities and motive of a Co-Operative Bank are clearly indicative of their being commercial concern, service tax is being levied upon those.

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CA PARAS BAFNA

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15 February 2011 what ever is excluded, is included in the Act by inserting another wider term.

Basically the theme of Service Act is to make the tax base as broad as it can be made. Thank you sir, for having a nice
discussion on this topic.