Payment of Premium or Salami for Transfer of Interest in Property are Exempted from Service Tax: CESTAT [Read Order]

The Kolkata bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) held that Salami or Premium received in respect of a lease of immovable property was not eligible for service tax. 

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 immovable property. 

Pulak Saha, the counsel for the assessee contended that the price paid for transfer of possession or the right to enjoy the property was called the 'premium or salami' and the periodical payments made for continuous use of the property under lease was called 'rent'. 

Also submitted that the 'Salami or Premium' received in respect of the lease of immovable property was not eligible for service tax. 

K. Chowdhury , the counsel for the department relied on the decisions made by the lower authorities and contended that the assessee was liable to pay the service tax and demand raised by the revenue was as per the law and liable to be sustained. 

The Bench observed that in the case of Greater Noida Industrial Development Authority vs Commissioner of Central Excise and Service Tax, the court held that no service tax leviable on the 'Salami or Premium' received in respect of the lease of immovable property. 

The two-member bench comprising Ashok Jindal (Judicial) and Anpazhakan (Technical) held that the assessee was not liable to pay the service tax on the salami or premium received by the assessee. 

To Read the full text of the Order CLICK HERE

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