Customs Excise & Service Tax Appellate Tribunal ( CESTAT ) had held that service tax would be chargeable only on the rent collected from the lessor in the case of leasing of immovable property. The bench observed that under the provisions of Section 66E of the Finance Act, the service under the category of ‘renting of immovable property’ has been considered as a declared service.
The assessee, M/s Asmita Infratech Ltd is engaged in providing various taxable services defined under the Finance Act, 1994. During the disputed period from 2014-15 to 2017-18, the appellant had sub-leased the industrial lands allotted by Maharashtra Industrial Development Corporation ( MIDC ) to various customers. The consideration received for such sub-leasing of the property was reflected in the books of account under the accounting heading “Sale of property/rights”. On scrutiny of the books of accounts maintained by the appellant, the Service Tax Department alleged that sub-leased amount received by the appellant from various persons should be taxable under the category of ‘renting of immovable property’, defined as “service” under Section 65B(41) of the Finance Act, 1994.
Assessee contended that for sub-leasing the industrial lands, the appellant received a premium from the person in whose favour the land was sub-leased. Assessee further contended that the Revenue has confirmed the demand on the premium amount, the same cannot be considered as the service under the category of renting of immovable property.
Revenue contended that the findings recorded in the impugned order and further submitted that since the premium amount was received by the appellant on periodical basis, the same should be considered as rent and since such rental amount is in context with immovable property, the provisions of taxable service under the category of renting of immovable property is squarely applicable for payment of Service Tax on the amount of premium received by the assessee.
The two member bench comprising S.K. Mohanty, ( Member, Judicial ) and M.M Parthibhan ( Member, Technical ) observed that under the provisions of Section 66E of the Finance Act, the service under the category of ‘renting of immovable property’ has been considered as a declared service. Thus, any amount received towards ‘rent’ for letting out the property will only be liable for payment of service tax and not otherwise.
The bench observed that “as per the contractual norms, the rent amount has been fixed, which the appellant is entitled to receive from the lessee for letting out the property, which had not been disputed by the department in the present case. One time premium received by the appellant cannot be equated with rent inasmuch as the said amount is payable by the lessee for obtaining lease of the immovable property and for various infrastructural facilities provided in that property.” The bench has held that service tax would be chargeable only on the rent collected from the lessor in the case of leasing of immovable property. The bench set aside the impugned order.
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