CENVAT credit on input services linked to renting of immovable property was allowed where the services had direct business nexus.

CENVAT credit was available on service tax paid for input services used in connection with renting of immovable property, because services such as advertising, management consultancy, security, telecommunication, insurance and repairs had a direct nexus with the business of hiring out godowns and maintaining the taxable output service. Input services that are integrally connected with provision of the output service are not extraneous to the business activity and qualify for credit. On that basis, denial of CENVAT credit was held unsustainable, and the appellant was entitled to the credit.

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Issues: Whether the appellant was entitled to CENVAT credit of service tax paid on various input services used in relation to its renting of immovable property activity.

Analysis: The services in question were incurred for the appellant's business of hiring out godowns and attracting and maintaining the renting activity. The services such as advertising, management consultancy, security, telecommunication, insurance, and repair-related services were found to have a direct nexus with the business activity and were therefore not extraneous to the output service. The reasoning in the cited tribunal and High Court decisions was applied to hold that input services used in relation to the business activity qualify for credit when they are integrally connected with provision of the taxable output service.

Conclusion: The denial of CENVAT credit was unsustainable and the appellant was entitled to the credit.

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