Residential-use exclusion defeats service tax on immovable property rental where the lease and evidence show sole residential occupation.

Premises let for use as a residence by the lessee company's Managing Director fell within the residential-use exclusion from the taxable service of renting of immovable property under the Finance Act, 1994. The lease deed, supporting affidavit and absence of evidence of business or commercial use showed that the building was used solely as a residence. The mere fact that the lease stood in the name of a company did not, by itself, negate the stated residential character. The demand and penalty were therefore unsustainable, and the appeal succeeded with consequential relief.

---

---

Issues: Whether the premises at AL-61 was let out for residential purposes so as to fall outside the taxable service of renting of immovable property under Section 65(105)(zzzz) of the Finance Act, 1994.

Analysis: The lease agreement recorded that the premises was demised for use as a residence by the Managing Director of the lessee company, and the record contained no material to show that the property was used for business or commercial purposes. The statutory exclusion in the definition of taxable service applies to a building used solely for residential purposes, and the mere fact that the lease was executed in the name of a company did not by itself negate the stated residential use. The notarised affidavit supporting residential occupation till 31.03.2011 was also found credible, and the contrary inference drawn in the adjudication order was held to be unsupported by evidence.

Conclusion: The property at AL-61 was proved to have been used solely for residential purposes and was not liable to service tax under the said taxable entry.

Final Conclusion: The impugned demand and penalty could not be sustained, and the appeal succeeded with consequential relief.

Ratio Decidendi: A building let and shown to be used solely as a residence remains outside the taxable ambit of renting of immovable property, and the form of the lessee alone does not defeat the residential-use exclusion in the absence of contrary evidence.

---