Renting of immovable property taxability in long-term lease disputes: complete stay refused, partial pre-deposit ordered

Lease of 99 years was treated as transfer of lease-hold rights under municipal rules, so the amount received was characterised as lease rent and the activity fell within renting of immovable property under Section 65(90a) of the Finance Act, 1994. Prior legal uncertainty on the taxability of such renting was accepted as relevant when considering interim protection, particularly for demand beyond the normal limitation period. Complete stay was declined, the appellant was directed to pre-deposit the demand relating to the normal period, and recovery of the remaining adjudicated liability was stayed subject to compliance.

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Issues: Whether the appellant was entitled to complete stay of the service tax demand pending appeal and whether a pre-deposit was warranted in view of the nature of the 99-year lease and the alleged confusion on taxability.

Analysis: The lease transactions were treated under the applicable municipal rules as transfer of lease-hold rights and not outright sale. The amount received was therefore characterised as lease rent, and the definition of renting of immovable property under Section 65(90a) of the Finance Act, 1994 was held to cover such leasing activity. At the same time, the existence of prior legal confusion on the taxability of renting of immovable property, and the earlier view that such activity did not amount to a taxable service, was accepted as relevant for considering stay, particularly for the portion of demand beyond the normal limitation period.

Conclusion: Complete stay was declined. The appellant was directed to pre-deposit the demand relatable to the normal period, and recovery of the remaining adjudicated liability was stayed subject to compliance.

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