In Brief
The Supreme Court held that chit fund business does not constitute service tax under 'banking and other financial services'. Although the Finance Act, 2007 deleted the specific exclusion of 'cash management' from the definition, the Court found that chit fund operations do not qualify as cash management or fund management. A chit is a special contract where multiple subscribers contribute periodically, with distributions determined by lot, auction or tender. This differs fundamentally from cash management (managing surplus cash and liquidity) or fund management (managing invested resources for specific purposes). The Court applied strict construction principles to the taxing statute, ruling against the Revenue and in favour of the assessees.
The lawyer headnote and full judgment text are available to registered users.