2014 (7) TMI 540 - AT - Service Tax

Tribunal excludes hotel building lease from taxable service, overturns lower authority decisions

M/s JAI MAHAL HOTELS PVT LTD Versus COMMISSIONER OF CENTRAL EXCISE

The Tribunal ruled in favor of the appellant, holding that leasing buildings for hotels does not constitute a taxable service under the provision related ... Demand of service tax - renting of immovable property - Leasing of buildings to Hotals - Held that:- The taxable service falling within the scope of Section 65(90a) and enumerated to be a taxable service under Section 65(105) (zzzz) is the renting of immovable property. A reading of clause (90a) and clause (zzzz) would indicate that a complex drafting methodology is adopted. Even in clause (90a) there are inclusionary and exclusionary clauses. Under this provision renting of immovable property or similar arrangement for use in course of or furtherance of business or commerce but excluding renting of immovable property by a religious body or to a religions body; renting of immovable property to an educational body, imparting skill or knowledge or lessons on any subject or field, other than a commercial training or coaching centre, are excluded. The Explanation under clause (90a) further defines the expression for use in the course or business or commerce and also incorporate a clarificatory clause for removal of doubts, not necessary for the purposes of these appeals. Similarly, in clause (zzzz) there are inclusionary or exclusionary clauses embedded. Renting of immovable proper for a hotel is expressly excluded from the ambit of the taxable service in Section 65(105) (zzzz) - Following decision of Ambience Construction India Ltd. vs. Commr. of S.T. Hyderabad [2012 (11) TMI 653 - CESTAT BANGALORE] Renting of buildings used for the purpose of accommodation including hotels, meaning thereby renting of a building for a hotel, is covered by the exclusionary clause and does not amount to an 'immovable property', falling within the ambit of the taxable service in issue - Decided in favour of assessee. Issues:1. Confirmation of levy and service tax by appellate Authority.2. Interpretation of taxable service 'renting of immovable property.'3. Exclusionary clause regarding buildings used for hotels.4. Dispute over the taxable service in the context of leasing buildings for hotels.5. Comparison of interpretations between the Authorities below and Tribunal.6. Reference to a contradictory conclusion by the Commissioner (Appeals).7. Conclusion on the transaction's exclusion from the taxable service.Analysis:1. The judgment revolves around the confirmation of levy and service tax by the appellate Authority against the appellant for specific periods. The orders were based on the provision of taxable service related to 'renting of immovable property.'2. The appellant contested the liability to tax on the grounds of a joint venture agreement with another entity and the exclusion of buildings used for hotels from the purview of taxable service under Section 65(105)(zzzz) of the Act.3. The Authorities below rejected the appellant's contentions, leading to a dispute over whether leasing buildings for hotels falls within the taxable service definition. The exclusionary clause (d) under Explanation 1 to Section 65(105)(zzzz) was crucial in this analysis.4. The Tribunal analyzed the legislative intent behind the exclusionary clause and concluded that buildings used for hotels do not constitute immovable property for the purpose of the taxable service. This interpretation differed from the Authorities below.5. The Tribunal referenced a previous judgment in Ambience Construction India Ltd. vs. Commr. of S.T. Hyderabad, which explicitly excluded renting of immovable property for hotels from the taxable service. This judgment supported the Tribunal's interpretation.6. A contradictory conclusion by the Commissioner (Appeals) in a separate order was noted, emphasizing a different understanding of the legislative intent behind the exclusionary clause.7. Ultimately, the Tribunal found that the transaction in question fell outside the taxable service scope, leading to the allowance of the appeals and the quashing of the impugned orders without costs. The Tribunal did not delve into the appellant's other contentions due to this conclusion.