Service tax valuation excludes notional interest on refundable security deposits where no evidence shows rent was influenced.

Section 67 of the Finance Act, 1994 limits service tax valuation to the consideration actually received for the taxable service. An interest-free refundable security deposit taken by the lessor as protection against default, utility charges, or damage was not consideration for leasing, and there was no evidence that it affected the rent fixed. In the absence of any deeming provision, notional interest on that deposit could not be added to the taxable value, and the service tax demand was unsustainable.

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Issues: Whether notional interest on interest-free security deposits taken by lessors of immovable property can be added to the agreed rent for the purpose of valuation under service tax law.

Analysis: Section 67 of the Finance Act, 1994 confines the taxable value to the consideration actually received for the taxable service. The security deposit was taken only as a safeguard against default in rent, utility charges, or damage to the property, and was refundable at the end of the lease. It was not consideration for the leasing service. The record contained no evidence that the deposit influenced fixation of rent. In the absence of any deeming provision, and applying the principle that notional additions cannot be made without legal authority and supporting evidence, notional interest could not be loaded into the taxable value.

Conclusion: Notional interest on the security deposit was not includable in the rent for levy of service tax, and the demand was unsustainable.

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