TaxTMI 
TaxTMI 
TaxTMI 
One of the taxable services is management or business auxiliary services and according to section 65(65) of Finance Act, 1994, management or business consultant means any person who is engaged in providing any service, either directly or indirectly, in connection with the management of any organization or business in any manner and includes any person who renders any advice, consultancy or technical assistance, in relation to financial management, human resources management, marketing management, production management, logistics management, procurement and management of information technology resources or other similar areas of management.
From the definition, it can be inferred that -
(i) Services should relate to—
(a) management of any organisation or business of any type in any manner
(b) rendering of any advice
(c) rendering consultancy services
(d) rendering technical assistances
(e) rendering services not covered in (a) to (d) above
(ii) Such services may be in relation to-
(a) financial management
(b) human resources management
(c) marketing management
(d) production management
(e) logistics management
(f) procurement and management of information technology resources, or
(g) other similar areas of management of any organization/business
Services must be rendered in connection with the management of any organization or business.
According to section 65 (105)(r), taxable service means Any service provided or to be provided to any person], by a management or business consultant in connection with the management of any organization or business, in any manner.
In K.R.Alloys Ltd. v. CCE, Calicut [2009 -TMI - 33227 - CESTAT BANGLORE], where assessee helped an individual in purchasing the assets of some other company and he received some amount in nature of commission, it was held that services rendered to an individual cannot be considered as management consultancy services.
A similar situation was decided in K.R.Alloys Ltd. v. CCE, Calicut [2009 -TMI - 32214 - CESTAT BANGLORE], where the Tribunal held that merely playing role in acquiring shares for a particular person can not be brought under activity of a management consultant where the assessee arranged for acquisition of shares of a company by an investor on which it received some commission where as the lower authorities had confirmed the demand based on Circular No 177/2/2001/CX-4 dated 27.6.2001.
In the said Circular CBEC had clarified that any service rendered in relation to merger and acquisition will be covered under the scope of taxable services provided by a 'management consultant'. It is further clarified that certain agencies such as merchant bankers who merely play a statutory role in mergers and acquisitions but do not provide any advice or consultancy are not to be treated as 'management consultant'. Such services would however fall for consideration under 'banking and financial services'. (Letter No. F. No. 177/2/2001-CX-4 dated 27-6-2001)
It was held by Bangalore bench of CESTAT that assessee was not carrying on the activity of management consultant but was a manufacturer of Ferro alloys. It only helped in the act of acquisition of shares and that activity on its part could not be brought within the ambit of 'management consultant' as per the definition. The definition itself clarifies that the activity should be done by management consultant and should be connected with the management of any organization in any manner. The activities stipulated in Circular dated 27.6.2001 were not carried out by the assessee and more so when the same Circular in para 11 stated that activity of merger and acquisition transaction is not to be treated as management consultancy service. The order was therefore, held to be not legal and proper and set aside.
In view of the above, services for acquisition of shares can not be liable to service tax under the management or business consultancy services. However, taxability of such service under banking and other financial services can not be ruled out.