Permanent assignment of leasehold rights is outside renting of immovable property; one-time premium and extended limitation fail.

Permanent assignment of leasehold rights, where the assignee is treated as lessee, rent is paid directly to the State authority and no reversionary interest remains with the transferor, falls outside renting of immovable property and is not liable to service tax. A one-time premium or salami received for such transfer is consideration for assignment of the leasehold interest, not periodic rent, and is therefore not taxable as renting services. Where the transactions were disclosed in records and returns and assignment deeds were produced to the department, suppression or wilful misstatement is not established, so the extended limitation period cannot be invoked.

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Issues: (i) Whether the permanent assignment of leasehold rights in favour of third parties amounted to renting of immovable property and was exigible to service tax; (ii) Whether the one-time premium or salami received on such transfer was taxable; (iii) Whether the demand was barred by limitation.

Issue (i): Whether the permanent assignment of leasehold rights in favour of third parties amounted to renting of immovable property and was exigible to service tax.

Analysis: The transaction was examined with reference to the pre and post 01.07.2010 and 01.07.2012 service tax regime. The assignment deeds showed transfer of the leasehold interest itself, with mutation in the assignees' names, the assignees being treated as lessees by the State authority, and rent thereafter becoming payable directly to the Government authority. The arrangement did not preserve a reversionary interest in the appellant and was not a mere sub-lease or ordinary renting arrangement. The scope of the service tax entry for renting of immovable property did not extend to an outright transfer of leasehold rights in such circumstances.

Conclusion: The transaction was not taxable as renting of immovable property and this issue was decided in favour of the assessee.

Issue (ii): Whether the one-time premium or salami received on such transfer was taxable.

Analysis: The distinction between premium or salami and rent was applied by reference to the legal definition of lease and established principles that premium is the price for transfer of the lessor's interest, whereas rent is a periodic payment for continued enjoyment. The appellant received only a one-time premium, while recurring rent was payable to the State authority. Since service tax was attracted to renting and not to transfer of interest in property, the premium received for assignment of leasehold rights could not be treated as taxable rent.

Conclusion: The premium or salami was not exigible to service tax and this issue was decided in favour of the assessee.

Issue (iii): Whether the demand was barred by limitation.

Analysis: The appellant had disclosed the transactions in its records and returns and had furnished the assignment documents to the department during investigation. The record did not support suppression of facts or wilful misstatement. In these circumstances, invocation of the extended period was unsustainable and the demand could not survive on limitation.

Conclusion: The demand was barred by limitation and this issue was decided in favour of the assessee.

Final Conclusion: The service tax demand, interest and penalty were held unsustainable, and the appeal succeeded.

Ratio Decidendi: A permanent assignment of leasehold rights, accompanied by transfer of title-like enjoyment to the assignee and payment of a one-time premium, is not taxable as renting of immovable property, and the extended limitation period cannot be invoked absent suppression of facts.

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