No Service Tax Payable by Standard Chartered Bank India on Allocation of General Administrative Expenses by Head Office: CESTAT [Read Order]

The Mumbai Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that service tax is not payable by Standard Chartered Bank India on allocation of head office executive and general administrative expenses’ by the head office.

Standard Chartered Bank, the appellants/assessee is a banking company operating through various branch offices situated across India and having their head office in London, United Kingdom i.e., Standard Chartered Bank, UK (SCB-UK). The SCB-UK has an extensive global network of its branches all over the world including India.

In addition to handling transaction processing activities across multiple product lines, including credit cards, personal loans, current and savings accounts, mortgage raising, and corporate finance solutions across all its domains, the appellants offer their clients a wide range of services, including trade services, cash management operations, utilities, loans processing, securities services, credit risk control, financial market operations, and compliance & assurance.

Redefine Finance: Master the Art of Investment Banking – Click here to Register

SCB-UK, the head office, incurs a number of expenses under different headings to support all of its global branches, including advertising, auditing fees, donations, entertainment, gross emoluments, insurance, legal professional fees, national insurance contributions, pension contributions, postage, telephone, telegraph, printing, stationery, publication, newspapers, rent & rates, subscriptions, travel expenses, machinery, furniture, computer, microfilm, and other miscellaneous expenses.

“Head office executive and general administrative expenses” refers to all of the aforementioned costs.  These costs spent by the appellants’ head office are allocated proportionately among several branches located in different nations based on the gross receipts of the banks operating in those nations.

 The Department had noted that the appellants’ SCB-UK head office’s expenses, which were distributed to the Indian branches, were for business support services, and that service tax had to be paid on the services that the appellants received under the heading of “business support services.”

Redefine Finance: Master the Art of Investment Banking – Click here to Register

The two-member bench comprising M.M. Parthiban (technical member) and S.K. Mohanty (judicial member) has noted that there is no service tax due and that the sharing of expenses cannot be regarded as services. The tribunal ruled that the Finance Act of 1994 does not allow for the imposition of service tax on “the allocation of head office executive and general administrative expenses” by the appellants’ London, UK head office.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates