2019 (6) TMI 1069 - AT - Service Tax

Tax exemption for vacant land leases clarified by Tribunal decision pre-amendment date

The Tribunal ruled that prior to a specific amendment date, renting out vacant land with subsequent construction by the lessee, such as installing a ... Renting of immovable property - vacant land - service tax liability - attribution of lessee's construction - amendment to definition of immovable property effective 01.07.2010Renting of immovable property - vacant land - service tax liability - attribution of lessee's construction - amendment to definition of immovable property effective 01.07.2010 - Renting of vacant land to a lessee who subsequently erects a transmission tower is not liable to service tax as renting of immovable property for the period prior to 01.07.2010. - HELD THAT: - The appellant had merely given vacant land on lease to M/s Hutch Company, and the transmission tower was erected and installed by the lessee on its own. The installation cannot be attributed to the appellant; therefore the appellant's activity was confined to providing vacant land. The expansion of the definition of immovable property by amendment (explained in the judgment) took effect from 01.07.2010 and brought within service tax ambit situations where constructions arise subsequently on leased vacant land. Prior to that amendment, vacant land leased out which later saw construction by the lessee did not fall within the renting of immovable property service. Applying this legal position to the facts, the demand of service tax for the period before 01.07.2010 is unsustainable.Impugned order set aside; appeal allowed and demand annulled insofar as it relates to renting of vacant land prior to 01.07.2010.Final Conclusion: The Tribunal held that renting out vacant land on which the lessee later erected a transmission tower did not attract service tax as renting of immovable property prior to the amendment effective 01.07.2010; the appeal was allowed and the demand set aside. Issues involved:Whether vacant land given on rent, where a transmission tower is installed by the lessee, is liable to service tax under renting of immovable property.Analysis:The issue in this case revolves around determining the liability of service tax on vacant land rented out to a lessee who installs a transmission tower. The appellant argued that vacant land does not fall under the definition of immovable property for service tax purposes. The appellant contended that the installation of the transmission tower by the lessee does not change the status of the land. The appellant highlighted that the amendment to the definition of immovable property only brought such situations under the service tax net from 01.07.2010 onwards, making the demand prior to this date unsustainable.The Revenue, represented by the Assistant Commissioner, supported the findings of the impugned order, emphasizing the tax liability on the rented vacant land with a transmission tower installed by the lessee. However, the Tribunal examined the submissions from both sides and reviewed the records. The Tribunal observed that the appellant merely rented out vacant land to the lessee, who independently installed the transmission tower. It was clarified that any structure built on the vacant land would be considered immovable property only from 01.07.2010 onwards due to the amendment. Therefore, the Tribunal concluded that prior to this amendment, the activity of renting out vacant land with subsequent construction was not taxable. Consequently, the demand for service tax was deemed unsustainable, leading to the setting aside of the impugned order and allowing the appeal.This judgment clarifies the taxability of vacant land rented out to a lessee who erects structures like transmission towers. It underscores the significance of the date of the amendment in determining the tax liability concerning immovable property. The decision provides a clear interpretation of the law regarding service tax on renting of immovable property, particularly in cases involving subsequent construction on leased vacant land.