Service Tax not leviable if no monetary consideration is charged for Services: CESTAT [Read Order]

The Customs, Excises, Service Taxes Appellate Tribunal (CESTAT), New Delhi Bench held that no Service Tax is leviable if no monetary consideration is charged for Services.

The Appellant, M/s. Golcha Properties Pvt. Ltd. an owner of a cinema hall called ‘Golcha Cinema’ and engaged in the business of exhibiting films in this theatre, has assailed the order passed by the Principal Commissioner of Service Tax, Delhi1 that confirms the demand for service tax under “renting of immovable property” service with penalty and interest proposed in the two show-cause notices.

The Principal Commissioner found that the Appellant had provided the ‘renting of immovable property’ services. For an activity to fall under ‘renting of immovable property’ services, the nature of the activity should be that of renting or letting or leasing or licensing or other similar arrangements of immovable property, for use in the course or furtherance of business or commerce.

In other words, where an immovable property is given for use by the service recipient or where there is a transfer of the right to enjoy the property for a certain time for a consideration paid or promised or where there is granting of the right to use and occupy the immovable property by way of tenancy, lease, license, the transaction would be covered under the category of ‘renting of immovable property’ services.

In the instant case, the immovable property i.e. the theatre is used and occupied by the Appellant in its own right to screen the films and at no point in time, the theatre is used by the Distributor.

The appellant submitted that for an activity to fall under ‘renting of immovable property’ services, the nature of the activity should be that of renting or letting or leasing or licensing or other similar arrangements of immovable property, for use in the course or furtherance of business or commerce. In the instant case, the immovable property i.e. the theatre is used and occupied by the Appellant in its own right to screen the film and at no point of time, the theatre is used by the Distributor and the agreements between the Appellant and the Distributors was on a revenue-sharing basis and hence, no service tax was leviable.

The two-member bench headed by President, Justice Dilip Gupta and Technical Member, C.L. Mahar allowed an appeal and took into consideration the case of Moti Talkies v. CST wherein it was held that the demand of service tax under ‘renting of immovable property’ service was not justified for the reason that the Appellant had not provided any service to the Distributor, nor the Distributor had made any payment to the Appellant as a consideration for the alleged service.

Therefore, the CESTAT held that the finding of the Principal Commissioner that ‘renting of immovable property’ service had been rendered by the Appellant to the film distributors was not sustainable and consequently demand of service tax on these income heads was not sustainable. The Tribunal allowed the appeal to set aside the impugned order.