service tax applicability on property taken by company for accomodation to its employees

[shiva kumar]

Fact: Mr A, director is giving residential property to Co. on rent of ₹ 24 Lacs p.a. The rent paid by Co. is considered as business expenses for which deduction is taken in Income tax. On the other hand Co. has provided the same property to director as rent free accommodation.

• As we know the renting of residential property for residence purpose is under negative list in service tax. In the above case the property is residential in nature but since the property is given to a company so would it fall under the category renting of residential property for the furtherance of business & profession ??

AI Summary

Debate on Service Tax Applicability for Company-Rented Residential Property for Director's Accommodation; Focus on Rental Agreement Terms. A discussion on the applicability of service tax on a residential property rented by a company for its director's accommodation. The property, rented for 24 lakhs annually, is considered a business expense for tax deduction. The debate centers on whether this constitutes renting for business purposes, thus attracting service tax, despite being used for residential purposes. Opinions suggest that the rental agreement's terms are crucial; if it specifies residential use, service tax may not apply, but if it allows company discretion, it could be deemed commercial, making service tax applicable.