2026 (1) TMI 1520 - AT - Service Tax

Exemption for mutual fund distributor commission affirmed, tribunal applies precedent and sets aside service tax demand for commission receipts

Commission earned for distribution of mutual fund units was held to fall within the exemption framework and as business auxiliary services, relying on an ... Exemption under Notification No.13/2003-ST - Classification as Business Auxiliary Services - Validity of Board Circular No.66/15/2003-ST - Commission as commission agent for distribution of mutual fund units - Section 65(50) of the Finance Act, 1994 - HELD THAT:- After going through the appeal papers and factual details produced before, it is find that undoubtedly the amount earned by the Appellant is only on account of commission received for distribution of mutual funds. This issue stands squarely covered by the decision of the Principal Bench, New Delhi in the case of Commissioner of Service Tax, Delhi v. P.N. Vijay Financial Services (P) Ltd. [2008 (9) TMI 72 - CESTAT, NEW DELHI], wherein the Principal Bench has taken the view that no Service Tax is required to be paid. Following the ratio laid down and the above decision, I set aside the impugned order. The Appeal filed by the Appellant stands allowed along with consequential relief, if any, as per law. Issues: Whether commission earned by the appellant on distribution of mutual fund units is exigible to service tax as Business Auxiliary Services or is exempt under Notification No.13/2003-ST.Analysis: The Tribunal examined whether mutual fund units qualify as 'goods' within the meaning of section 2(7) of the Sale of Goods Act and section 65(50) of the Finance Act, 1994, and whether commission earned for distribution falls within the exemption granted by Notification No.13/2003-ST to commission agents dealing in goods. The Tribunal relied on the Principal Bench decision in Commissioner of Service Tax, Delhi v. P.N. Vijay Financial Services (P) Ltd., which held that units of mutual funds are to be treated as goods for these purposes and that commission agents engaged in sale or purchase of such goods are covered by the exemption. The Board's Circular taking an opposite view had been quashed by the Delhi High Court and the Tribunal followed that precedent.Conclusion: The commission earned by the appellant on distribution of mutual fund units is exempt from service tax under Notification No.13/2003-ST; appeal allowed in favour of the assessee.Ratio Decidendi: Mutual fund units qualify as goods under section 2(7) of the Sale of Goods Act read with section 65(50) of the Finance Act, 1994, and commission earned by a commission agent for sale or purchase of such goods is covered by the exemption in Notification No.13/2003-ST.