The Kolkata Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the sub-lease of immovable property and the leasehold right are permanently assigned are not liable to service tax under the category of ‘Renting of immovable property’.
Luxmi Township Limited, the appellant assessee is engaged, inter alia, in the business of setting up modern Townships which include infrastructure and support facilities, and the assessee obtained permission from the Government of West Bengal to occupy the land to set up a satellite Township.
The assessee appealed against the order passed by the adjudicating authority for confirming the service tax demand along with the interest and for the imposition of penalty against the assessee under the category of renting of immovable property.
Pulak Saha, the counsel for the assessee contended that the the transaction of the assessee must be treated as ‘sale of leasehold rights’ and service tax would not apply to the outright transfer of rights.
Also submitted that the leasehold right along with obligations are permanently assigned in favor of the assignees herein and the property would not come back to the assessee, it cannot be considered as sub-lease of property thereby attracting the service tax liability under “Renting of immovable property”.
K.Chowdhury, the counsel for the department relied on the decisions made by the lower authorities and contended that the assessee had sub-leased or assigned the plots to the business/commercial entities on a long-term basis for a consideration and thus rendered taxable services relating to renting, letting, leasing or other similar arrangements of immovable property and such activity would fall within the purview of service tax.
The Bench observed that once the assessee executed the Deed of Assignment in favor of the business entities, the ‘Title’ of the land that had been assigned to them had been transferred in the name of the three parties. Subsequently, lands had also been mutated in the name of the respective parties. Therefore, the transaction must be treated as a ‘sale of leasehold rights’ and service tax would not apply to the outright transfer of rights.
The two-member bench comprising Ashok Jindal (Judicial) and Anpazhakan (Technical) held that the transaction undertaken by the assessee cannot be termed as a ‘lease’ or ‘sub-lease’ for the levy of service tax.
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