2014 (11) TMI 581 - AT - Service Tax

Religious bodies liable for service tax on property rentals: Tribunal clarifies exemptions vs. obligations

M/s. The Society of St. Joesph's College Versus Commissioner of Central Excise & Service Tax, Tiruchirapalli

The case addressed the liability of service tax on renting immovable property by a religious body, emphasizing the distinction between income tax ... Waiver of pre deposit - Renting of Immovable Property Services - Held that:- Applicant had given on rent various commercial complexes to various commercial concerns. It is noticed that the applicant declared themselves a Charitable Trust under Income-tax Act. The CBEC s Circular, dated 23.08.2007 clarified that the assessee is eligible for exemption under Income-tax Act on the ground of being a Charitable Institution and is of no consequence or has any relevance for service tax purpose. In the present case, the facts remain that the demand of service tax is on the commercial complexes which was given on rent to various commercial concerns. on each of the appellant s clearing all the arrears as on the said date in three equated instalments, on or before 1st March, 2012, 1st May, 2012 and 1st July, 2012, no coercive steps shall be taken against the appellants for recovery of the said arrears. However, in the event of default on the part of the appellants in deposit of any one of the instalments by the due date, it will be open to the respondents to recovery the entire amount in arrears forthwith - Partial stay granted. Issues involved:1. Liability of service tax on renting of immovable property by a religious body.2. Applicability of exemption under Income-tax Act for charitable institutions.3. Pre-deposit requirement for appeal hearing.4. Interpretation of commercial activities by a religious body.Analysis:Issue 1: Liability of service tax on renting of immovable property by a religious bodyThe applicant, a religious body running educational institutions and commercial complexes, faced a service tax demand for renting immovable property and sale of space for advertisement. The applicant claimed exemption as a religious body under Section 65(90a) of the Finance Act, 1994. The Counsel argued that the demand was partly barred by limitation and cited judicial precedents supporting the non-applicability of tax for extended periods. The Revenue contended that the applicant's activities did not qualify for exemption, emphasizing the need for pre-deposit based on Supreme Court's interim order.Issue 2: Applicability of exemption under Income-tax Act for charitable institutionsThe Tribunal examined the applicant's status as a charitable trust under the Income-tax Act and its relevance to service tax liability. Referring to CBEC's Circular, it clarified that income tax exemptions did not automatically extend to service tax. The Tribunal noted the commercial nature of the complexes rented out by the applicant, emphasizing the distinction between charitable status for income tax and service tax purposes.Issue 3: Pre-deposit requirement for appeal hearingConsidering the Supreme Court's interim order directing pre-deposit of arrears for service tax cases, the Tribunal directed the applicant to pre-deposit a specific amount within a stipulated period to stay recovery of the balance dues until appeal disposal. The Tribunal highlighted the need for compliance with the pre-deposit directive to proceed with the appeal process.Issue 4: Interpretation of commercial activities by a religious bodyThe Tribunal analyzed the nature of the applicant's activities involving renting commercial complexes to commercial concerns despite being a religious body. It emphasized the commercial aspect of the transactions and the applicant's charitable trust status under the Income-tax Act, distinguishing between tax exemptions for different purposes. The Tribunal's decision to require pre-deposit reflected the need to address the service tax liability pending appeal hearing.Overall, the judgment clarified the service tax liability of religious bodies engaging in commercial activities, highlighting the distinction between income tax exemptions and service tax obligations. The directive for pre-deposit underscored the procedural requirements for appeal hearings in service tax disputes, ensuring compliance with interim orders and facilitating a fair resolution of the tax issues raised in the case.