Transaction of Share Sale cannot be considered as an Activity Promoting Business of Purchaser of shares: CESTAT sets aside Service Tax Demand under BAS [Read Order]

In a recent case, the Chennai bench of the Customs, Excise And Service Tax Appellate Tribunal ( CESTAT ) held that the transaction of sale of shares cannot be considered as an activity promoting the business of the purchaser of shares and set aside the service tax demand under Business auxiliary service ( BAS ).

M/s. Rattha Holding Company Pvt. Ltd, the appellants are registered with the Department for providing Renting of Immovable Property Services. On intelligence gathered that the appellant is not discharging Service Tax under this category as well as on other services, even though consideration was received by them, the Department conducted the investigation. 

The appellant had transferred a certain amount of shares to the joint venture partner, M/s. Ascott (Mauritius). The Department viewed that the amount so received by the appellant is a consideration for providing the service of promotion of the business of M/s. Ascott (Mauritius). The transaction is nothing but the sale of shares and there is no situation of providing services to M/s. Ascott (Mauritius).

A two member bench of Ms Sulekha Beevi C S, Member (Judicial) and  Mr Vasa Seshagiri Rao,Member (Technical) observed that the Tribunal itself in the appellant’s case had considered the very same issue and held that the demand could not be sustained as there is no provision of services. It was observed that “Whatever be the circumstances under which the shares were sold or the premium of the shares was fixed between the parties, the transaction of sale of a share in no way can be considered as an activity promoting the business of the purchaser of the shares.  It is indeed the Sale of Shares and, therefore, the demand on this count cannot sustain and requires to be set aside, which we hereby do.” The CESTAT modified the impugned order to the extent of setting aside the demand, interest and penalties imposed under Business Auxiliary Services.

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