Residential dwelling rental exemption applies where premises are ultimately used as residence, supporting refund maintainability.

Renting of premises used as hostel accommodation for students was held to fall within the exemption for renting of a residential dwelling for use as residence, because the exemption is activity-specific and turns on the ultimate residential use rather than on whether the lessee itself occupies the premises as its own residence. On that construction, the rental income was not liable to service tax. The refund claim was also maintainable, and the denial of refund was set aside with consequential relief.

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Issues: Whether renting of premises used as hostel accommodation for students falls within the exemption for services by way of renting of residential dwelling for use as residence under Section 66D(m) of the Finance Act, 1994, and whether the refund claim was maintainable.

Analysis: The premises was rented to an educational foundation and was ultimately used for residence by students. The expression "renting of residential dwelling for use as residence" is an activity-specific exemption and does not require the lessee to occupy the premises as its own residence. The authority also noted that the proceedings turned on the correctness of the exemption claim and not on any separate objection that the assessment had not been challenged. The interpretative guidance in the TRU letter and the Supreme Court's ruling on similar language supported a broad construction of the exemption where the ultimate use remained residential.

Conclusion: The rental income was not liable to service tax, and the refund claim was maintainable. The issue is decided in favour of the assessee.

Final Conclusion: The exemption under Section 66D(m) applied to the impugned letting arrangement, and the denial of refund was set aside with consequential relief.

Ratio Decidendi: Where premises rented as residential accommodation are ultimately used as residence, the exemption is attracted irrespective of whether the occupant is the lessee or persons housed through the lessee, because the exemption is activity-specific and not person-specific.

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