One-time lease premium forms part of taxable renting of immovable property, even when paid upfront before lease execution.

A one-time premium or salami paid on grant of a lease is consideration for transfer of the right to enjoy immovable property, distinct from recurring rent, but still forms part of the taxable value of renting of immovable property. The text explains that section 105 of the Transfer of Property Act recognises lease consideration and periodic rent together, and that the Finance Act, 1994 covers leasing and similar arrangements; from 01.07.2012, renting of immovable property also became a declared service. Accordingly, the lump-sum premium is taxable under renting of immovable property for both the pre-01.07.2012 and post-01.07.2012 periods, and the contrary Tribunal view was rejected.

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Issues: Whether the one-time amount described as premium or salami received on grant of lease of immovable property is taxable under renting of immovable property for the periods prior to 01.07.2012 and from 01.07.2012.

Analysis: Premium or salami is a one-time consideration paid for being let into possession and for transfer of the right to enjoy the property, while rent is a periodic payment for continuous enjoyment. Under section 105 of the Transfer of Property Act, 1882, a lease comprises both the price paid for the transfer of the right to enjoy the property and the recurring rent. The definition of renting of immovable property under the Finance Act, 1994 includes leasing and similar arrangements, and from 01.07.2012 renting of immovable property became a declared service. The one-time premium is thus part of the consideration for renting and not outside taxability merely because it is paid in lump sum or before execution of the lease deed.

Conclusion: The one-time premium or salami received for grant of lease is exigible to service tax under renting of immovable property for both the pre-01.07.2012 and post-01.07.2012 periods, and the contrary view taken by the earlier Tribunal decisions was rejected.

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