2014 (7) TMI 540 - AT - Service Tax

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

The Tribunal ruled in favor of the appellant, holding that leasing buildings for hotels does not constitute a taxable service under the provision related ... Renting of immovable property - taxable service under Section 65(90a) and Section 65(105)(zzzz) - exclusionary clause in Explanation 1 to Section 65(105)(zzzz) - buildings used for the purpose of accommodation including hotelsRenting of immovable property - exclusionary clause in Explanation 1 to Section 65(105)(zzzz) - buildings used for the purpose of accommodation including hotels - Renting of buildings used for hotels falls outside the definition of 'immovable property' for the purposes of the taxable service and therefore is not taxable under the renting of immovable property service provision. - HELD THAT: - A true and fair construction of Explanation 1 to Section 65(105)(zzzz), and in particular sub clause (d), excludes from the expression 'immovable property' buildings used for the purpose of accommodation, including hotels. The taxable service defined as renting of immovable property under Section 65(90a) and enumerated in Section 65(105)(zzzz) therefore does not extend to renting of buildings that are used for hotels. The Tribunal's earlier decision in Ambience Construction India Ltd. dealing with identical provision supports this interpretation. As the transaction in issue is thus outside the ambit of the taxable service, there is no requirement to consider the appellant's alternate contention regarding the joint venture/profit sharing relationship between the parties.Appeals allowed; impugned orders quashed as the levy of service tax on renting of the buildings used for hotels does not sustain.Final Conclusion: The appeals are allowed and the impugned appellate orders confirming service tax for the periods 01.06.2007 to 30.11.2009 and December 2009 to March 2010 are quashed, the transactions having been held outside the taxable renting of immovable property service. 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.