Religious body rental exclusion and precinct exemption limit: church shop leases were taxable only for the normal post-2012 period.

Renting by or to a religious body was excluded from taxable renting of immovable property for the pre-01.07.2012 regime, so leasing by a church of premises held as part of its religious institution was not taxable for that period. For the post-01.07.2012 period, commercial shops let to private tenants within church premises were not covered by the exemption for precincts of a religious place meant for the general public. The extended period and penalties were not justified because the record showed confusion on levy and the assessee had obtained registration after departmental approach, so liability was confined to tax and interest for the normal period with recomputation required.

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Issues: (i) whether renting of the commercial premises by a church constituted taxable renting of immovable property for the period up to 30.06.2012 or fell within the exclusion for renting by or to a religious body; and (ii) whether the renting of shops situated within the church premises was exempt under Notification No. 25/2012-ST dated 20.06.2012 for the period from 01.07.2012 to February 2015, and whether extended period and penalties were sustainable.

Issue (i): whether renting of the commercial premises by a church constituted taxable renting of immovable property for the period up to 30.06.2012 or fell within the exclusion for renting by or to a religious body.

Analysis: The definition of renting of immovable property under Section 65(90a) of the Finance Act, 1994 expressly excluded renting by a religious body or to a religious body. The appellant was a church and charitable trust, and the premises were held and used as part of the religious institution. On the facts and the nature of the appellant's organisation, the renting activity for the period prior to 01.07.2012 fell within the statutory exclusion. The tax demand for that period could not be sustained.

Conclusion: The demand for the period up to 30.06.2012 was set aside in favour of the assessee.

Issue (ii): whether the renting of shops situated within the church premises was exempt under Notification No. 25/2012-ST dated 20.06.2012 for the period from 01.07.2012 to February 2015, and whether extended period and penalties were sustainable.

Analysis: The exemption for renting of precincts of a religious place meant for general public did not cover commercial shops let out to private tenants for business purposes. However, the record showed confusion regarding the levy during the relevant period, and the appellant had complied with registration after being approached by the Department. For that reason, invocation of the extended period and imposition of penalties were not justified. Tax and interest were confined to the normal period from 01.07.2012 onwards, with the matter remitted for recomputation.

Conclusion: The exemption claim for the post-01.07.2012 period was rejected, but penalties and extended limitation were set aside, and the liability was restricted to tax and interest for the normal period only.

Final Conclusion: The appellant succeeded for the pre-01.07.2012 period and on penalties, while liability was upheld for the post-01.07.2012 period subject to recomputation of tax and interest by the adjudicating authority.

Ratio Decidendi: Renting by or to a religious body is excluded from taxable renting of immovable property for the pre-01.07.2012 regime, but commercial letting of shop premises within a religious precinct to private tenants for business use is not covered by the exemption for precincts meant for general public under Notification No. 25/2012-ST.

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