Service Tax not Payable on Rent received on “Renting of Immovable Property Service” prior to 01.06.2007: CESTAT [Read Order]

The Kolkata Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the service tax is not payable on rent received on “Renting of Immovable Property Service” prior to 01.06.2007.

The appellant, Champa Properties Limited, were having three properties, namely, (a) 25A, (b) 106, and (c) 114 in Kolkata. It was alleged that the appellant had received advance payment of rent on the property at 25A, in the month of February, 2005 for the period April, 2005 to May, 2007 and again on 28.02.2008 for the future period. The appellant also received rent from 106, for the financial year 2007-08 & 2008-09 and from 114 and the appellant had not paid the service tax on the rent received.

The appellant contested the issue before the adjudicating authority by filing an defence submission and the adjudicating authority by way of the impugned order, confirmed the demand of service tax against the appellant along with interest and imposed penalty also.

Sanjoy Bhowmick, on behalf of the assessee submitted that they had received rent in respect of the premises situated at 25A, in terms of an agreement dated 03.02.2005 and the same shall be for the future period and the appellant had adjusted the said payment of rent received by them for the relevant period by paying service tax thereon, which is not disputed by the authorities. It is the submission of the appellant that as the appellant has paid the service tax while providing services to the service recipient, therefore, no differential service tax or interest was payable by the appellant.

With regard to payment of rent in respect of 106, it was the submission that they received rent during the financial year 2007-08 from various tenants for the period prior to 01.06.2007, where no service tax was payable on the category of “Renting of Immovable Property Service”.

He further submitted that an amount had been received towards rent for residential purposes, for which, no tax was payable and all the above properties had been transferred to separate entities, with effect from 01.04.2008. Therefore, the appellant was not liable to pay service tax as the appellant was not being the owner of the said properties.

The two-member Bench of Ashok Jindal, Member (Judicial), K. Anpazhakan, Member (Technical) observed that prior to 01.06.2007, no service tax was payable under the category of “Renting of Immovable Property Service”, therefore, for rent received by the appellant for the period prior to 01.06.2007 in respect of all the three properties, the appellant was not liable to pay service tax.

With regard to the property situated at 25A they had paid the service tax, Further, the premises at 106, the same parts of the premises were rented out for residential used for which, no service tax was payable for the amount received towards under the category of “Renting of Immovable Property Service” for residential purposes.

The appellant was not the owner of the above properties with effect from 01.04.2008. Therefore, on 01.04.2008 onwards, the appellant was not liable to pay service tax.

The Bench by invoking Section 80 of the Finance Act, 1994, waived the penalty imposed on the appellant.

To Read the full text of the Order CLICK HERE

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