Tribunal grants exemption for renting immovable property, rules in favor of appellant

The Tribunal ruled in favor of the appellant, allowing the benefit of the threshold exemption under Notification No.6/2005 for renting of immovable property. It held that rent received in 2006-07 should not impact the exemption claim for 2007-08 since the taxable service of renting only became taxable from June 2007. The Tribunal upheld the Service Tax payment by the appellant, waived the penalty imposed, and restricted the demand for Service Tax to the amount already paid with interest.

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Issues:
1. Applicability of threshold exemption under Notification No.6/2005 for renting of immovable property.
2. Denial of benefit of threshold exemption by the Department.
3. Liability for payment of Service Tax on rent received.
4. Dispute regarding penalty imposition.

Analysis:

Issue 1: Applicability of threshold exemption under Notification No.6/2005 for renting of immovable property
The appellant claimed exemption under Notification No.6/2005 for the rent received from Axis Bank. The Notification exempts Service Tax payments up to a certain value, subject to conditions. The Tribunal noted that renting of immovable property became a taxable service from 01.06.2007. The appellant argued that rent received in 2006-07 should not be considered as consideration for taxable service since the service became taxable only from June 2007. The Tribunal agreed and held that the benefit of the exemption cannot be denied based on 2006-07 rent receipts.

Issue 2: Denial of benefit of threshold exemption by the Department
The Department denied the appellant the benefit of the threshold exemption under Notification No.6/2005, claiming that the appellant received consideration for taxable service exceeding the threshold in the previous financial year. However, the Tribunal ruled in favor of the appellant, stating that rent received in 2006-07 should not affect the exemption claim for 2007-08, as the taxable service of renting commenced only from June 2007.

Issue 3: Liability for payment of Service Tax on rent received
The appellant had paid the Service Tax amount along with interest, except for disputing the penalty. The Tribunal acknowledged the payment made by the appellant and upheld the same, as it was not in dispute. The liability for Service Tax on rent received by the appellant from Axis Bank was a subject of dispute, which was resolved in favor of the appellant based on the Notification provisions.

Issue 4: Dispute regarding penalty imposition
The Tribunal considered the introduction of the service of renting of immovable property from June 2007 and the demand for Service Tax immediately after its introduction. Consequently, the Tribunal decided in favor of the appellant, waiving the penalty under Section 80 of the Act. The penalty imposed under various sections was waived, and the demand for Service Tax was restricted to the amount already paid by the appellant along with interest.

In conclusion, the Tribunal allowed the appeal partly, granting the benefit of the threshold exemption, upholding the Service Tax payment with interest, and waiving the penalty imposed, considering the circumstances surrounding the introduction of the taxable service of renting of immovable property.

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