service tax

The cheque deposited by party has gone in "collection" ( it was a treasury cheque) hence the bank charged "bank charges for collection" from the party , not the reserve bank , and on that charges service tax is applicable and payable by the party. 

interbanking transactions are out of preview of TDS, banks have to get pre premission for these at the time of formation of bank.

According to Section 65 (105) (zm), any service provided or to be provided to any person, by a banking company or a financial institution including NBFC, or any other body corporate or commercial concern, in relation to banking and other financial services is a taxable service.

According to Section 65 (12), “banking and other financial services” means-

(a) the following services provided by a banking company or a financial institution including a non-banking financial company or any other body corporate or [commercial concern], namely:—

(i)       Financial leasing services including equipment leasing and hire-purchase;

[Explanation.—For the purposes of this item, “financial leasing” means a lease transaction where—

(i) contract for lease is entered into between two parties for leasing of a specific asset;

(ii) such contract is for use and occupation of the asset by the lessee;

(iii) the lease payment is calculated so as to cover the full cost of the asset together with the interest charges; and

(iv)  the lessee is entitled to own, or has the option to own, the asset at the end of the lease period after making the lease payment;]

(ii) (Omitted by Finance Act, 2006 w.e.f. 1.5.2006);

(iii) Merchant banking services;

(iv) Securities and foreign exchange (forex) broking; and purchase or sale of foreign currency including money changing;

(v) Asset management including portfolio management, all forms of fund management, pension fund management, custodial, depository and trust services;

(vi) Advisory and other auxiliary financial services including investment and portfolio research and advice, advice on mergers and acquisitions and advice on corporate restructuring and strategy;

(vii) Provision and transfer of information and data processing;

(viii) Banker to an issue services

(ix) Other financial services namely, lending; issue of pay order, demand draft, cheque, letter of credit and bill of exchange; transfer of money including telegraphic transfer, mail transfer and electronic transfer, providing bank guarantee, overdraft facility, bill discounting facility, safe deposit locker, safe vaults; operation of bank accounts.

(b) Foreign exchange broking and purchase or sale of foreign currency, including money changing provided by a foreign exchange broker or an authorized dealer in foreign exchange or an authorized money changer, other than those covered under sub-clause (a)