Relief for Patna Municipal Corporation: CESTAT Rules Licensing Fee for Mobile Towers Not Taxable as 'Renting of Immovable Property' [Read Order]

Patna Municipal Corporation, the appellant, was issued a show cause notice demanding service tax of Rs. 1.5 crore under the category of "renting of immovable property" for various types of revenue collections made between 2007 and 2012. These included rent from shops and stalls, lease payments, license fees from mobile towers, and collections from the Inter-State Bus Terminal (ISBT).

The appellant accepted tax liability on rent collected from shops and certain PRDA properties, but it challenged the service tax demand on lease instalments, mobile tower licensing fees, bus parking collections at ISBT, and certain unspecified amounts.

It argued that lease payments were not monthly rent, that licensing fees were one-time charges for granting permission to install towers, and that ISBT charges were collected for overnight parking, not the renting of space. It further argued that all records had been disclosed, so the extended period of limitation and penalties were not applicable.

The revenue defended the demand by arguing that all such payments were commercial in nature and fit within the definition of renting of immovable property under Section 65(90a) and Section 65(105)(zzzz) of the Finance Act, 1994. It relied on previous rulings to support the taxability of mobile tower-related fees.

The two-member bench comprising Ashok Jindal (Judicial Member) and K. Anpazhakan (Technical Member) held that lease payments were indeed covered under renting and were taxable, but no penalties could be imposed since there was no suppression of facts.

Discover How Companies Manage Business Processes to Benefit Society! Click here

The tribunal found merit in the appellant's argument that licensing fees collected for mobile towers were not periodic rent but permission fees and thus did not fall within the scope of “renting of immovable property.” The tribunal also ruled that ISBT parking charges did not constitute rent and should not attract service tax.

The tribunal found that the department had not clearly defined the basis for one of the miscellaneous rent demands and set it aside. It also held that since the appellant had disclosed all transactions in its books and there was no intent to evade tax, the extended limitation period and associated penalties under Sections 78, 77(1)(a), and 77(1)(c) could not be invoked. However, the late fee for delay in filing service tax returns was upheld.

The tribunal ruled that service tax was payable only on the admitted rents and lease installments, but not on the licensing fees for mobile towers, ISBT parking charges, or vague claims unsupported by proper classification. Accordingly, the appeal was partially allowed.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates