Renting Not Taxable Before 2010 Retrospective Amendment, No Intent to Suppress Income: CESTAT Quashes Demand [Read Order]
CESTAT quashed the service tax demand, ruling that renting was not taxable before the 2010 retrospective amendment and there was no intent to suppress income
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The Chennai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) quashed service tax demand ruling that the renting of immovable property was not a taxable service before the retrospective amendment introduced by the Finance Act, 2010, and that there was no intention to suppress income on the part of the assessee. Super Electricals, the appellant, had leased out...
The Chennai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) quashed service tax demand ruling that the renting of immovable property was not a taxable service before the retrospective amendment introduced by the Finance Act, 2010, and that there was no intention to suppress income on the part of the assessee.
Super Electricals, the appellant, had leased out its premises to Anmod Stamping Pvt. Ltd. during the financial year 2008–09, collecting rent of Rs. 1.02 crore. At that time, the appellant was not registered under the service tax category for “renting of immovable property.”
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The department later found that the appellant had failed to pay service tax on the rental income and, after issuing advisories in 2011, served a show cause notice (SCN) dated October 4, 2013, demanding tax along with interest and penalties. The adjudicating authority confirmed the demand, and the Commissioner (Appeals) upheld the demand.
The appellant approached the CESTAT, arguing there was considerable legal uncertainty regarding the taxability of the renting of immovable property during 2008-09. The Delhi High Court, in Home Solution Retail India Ltd. v. Union of India, had held that mere renting of immovable property did not constitute a taxable service. It was only after the Finance Act, 2010, introduced a retrospective amendment with effect from June 1, 2007, that such renting became taxable.
The appellant’s counsel argued that in the absence of clarity and before the amendment, it could not have anticipated the future tax liability and could not be charged with suppression or intent to evade.
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The two-member bench comprising Ajayan T.V. (Judicial Member) and Vasa Seshagiri Rao (Technical Member) observed that the retrospective amendment by the Finance Act, 2010 clarified the legislative intent but also confirmed that there was genuine legal ambiguity during the relevant period.
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The tribunal held that mere collection of rent without payment of tax, in a legally unsettled context, did not constitute suppression of facts or deliberate evasion. The tribunal set aside the demand, interest, and penalty, holding that in the absence of willful suppression, the extended period of limitation could not be invoked.
To Read the full text of the Order CLICK HERE
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