Municipal Co. is Liable to pay Service Tax on Renting of Immovable Property even If Shops were Rented out as per a Govt Scheme: CESTAT [Read Order]

Service Tax - GST - CESTAT - Taxscan

The Delhi bench of the CESTAT, on Wednesday, held that the Municipal Corporation is liable to pay service tax while renting out of immovable property for commercial purpose despite the fact that the same was let out according to a scheme introduced by the Government.

The appellant, a local authority functioning under Chattisgarh Municipal Corporation Act, 1956, had let out its buildings/shops, which were given out to people for running the business in terms of Mukhyamantri Swalamban Yojna and similar such schemes.

They claimed that the considerations received for giving out the shops/buildings would not attract service tax. However, the department rejected the contention and demanded tax from the appellant.

Confirming the demand, the Tribunal bench noted that the shops, which are given out on rent are used for commercial purposes.

After perusing the copies of agreements, the bench found that the appellant could not place on record any exemption extended to them either due to their status or due to the purpose for which the said shops were rented out.

“These shops were given to particular sections of people in terms of a Scheme announced by the Government, by itself, does not take away the tax liability. “Renting of immovable property” service is with reference to renting, leasing, licensing, or other similar arrangements of immovable property for use in a course for “furtherance of business or commerce,” the bench said.

“The exclusion given is with reference to renting of such property by a religious body or education body. We could not find any exclusion from the tax entry which will apply to the appellants. Though the appellants are created by an Act and are performing as a local Government, there is no bar in taxing their activities if the immovable property rented out by them is used in the course “for the furtherance of business or commerce.” Admittedly, in the present case, the shops premises are used for business or commerce. In such situation, we find no reason for interfering with the findings of the lower authorities regarding tax liability of the appellant under the category of “renting of immovable property”,” the bench added.

Subscribe Taxscan Premium to view the Judgment
taxscan-loader