The Chennai bench of the Customs, Excise And Service Tax Appellate Tribunal ( CESTAT ) held that Service tax is not demandable on premises rented out for accommodation and related activities.
M/s. Rattha Holding Company Pvt. Ltd, the appellants are registered with the Department for providing Renting of Immovable Property Services. On intelligence gathered that the appellant is not discharging Service Tax under this category as well as on other services, even though consideration was received by them, the Department conducted the investigation.
It was noticed that the appellant had rented immovable property to M/s. Siesta Hospitality Limited (SHSL) had not paid the service tax from April 2010 to March 2012 on the rental amount they received. So also, they had not discharged Service Tax on the consideration received by them from M/s. Ascott (Mauritius) for selling the shares under a joint venture entered between the appellant and M/s. Ascott (Mauritius).
Further, the appellant had not discharged appropriate service tax on Management, Maintenance and Repair services. Show Cause Notice was issued to the appellant proposing to demand Service Tax under the above categories along with interest and for imposing penalties. After due process of law, the Original Authority confirmed the demand, interest and imposed penalty. Aggrieved by such order, the appellant is now before the Tribunal.
Counsel Ms. Radhika Chandrasekar appeared and argued for the appellant. In respect of the demand raised under Renting and Immovable Property Services, the Counsel submitted that the building belonging to the appellant was leased out to M/s. Siesta Hospitality Limited (SHSL) for running the business of guest rooms/accommodation.
The parties had entered into a lease deed in respect of this transaction and the lease deed would clearly show that the agreement is to provide the premises for the conduct of guest rooms as well as provide parking space in connection to such guest rooms.
The definition of Renting of Immovable Property Service as under Section 65(105)(zzzz) excludes buildings solely used for residential premises and used for purposes of accommodation, including Hotels, Hostels, Holiday accommodation etc. It was submitted that the demand of service tax cannot be sustained for the reason that the premises has been let out by appellant for conduct of guest rooms/accommodation.
From the above definition, it can be seen that when a building is rented out for being used for accommodation, including hotels, hostels, the levy of service tax is not attracted.
A two member bench of Sulekha Beevi C S, Member (Judicial) and Vasa Seshagiri Rao, Member (Technical) has found that the lease deed clearly showed that the premises is to be exclusively used for guest rooms and connected facilities like kitchen, dining room, parking spaces only. The demand of service tax cannot sustain when the premises is rented out for the purpose of accommodation and related activities.
The CESTAT held that the demand cannot be sustained and set aside the same.
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