Renting of Immoveable Property by Religious Trust

[Aliasgar Tambawala]

To the best of my knowledge, Service tax has been made applicable on all services unless they are covered in the Negative list or they are specifically exempt under notification  no. 25/2012-ST dated 20.06.12.

 Clause 4 of Exemption Notification  no. 25/2012-ST dated 20.06.12. reads as under:

“4.      Services by an entity registered under section 12AA of the Income tax Act, 1961 (43 of 1961) by way of charitable activities;”

and for the purpose of Notification  no. 25/2012-ST dated 20.06.12, “Charitable activities” has been defined to include:

“(k) “charitable activities” means activities relating to -

     (ii) advancement of religion or spirituality;”

In this regards I would like to know whether the services provided by an entity registered under section 12AA of the Income tax Act, 1961 (43 of 1961) shall be by way of charitable activities or whether the proceeds of the services provided shall be used for charitable activities?

For instance, can the above-mentioned Exemption Notification be interpreted to cover Renting of commercial property by an entity registered under section 12AA of the Income tax Act, 1961 (43 of 1961) under leave and license agreement to a licensee being a business entity (being services provided by an entity registered under section 12AA of the Income tax Act, 1961 (43 of 1961) and the licensee fees thereof being utilized for advancement of religion or spirituality?

[JAMES PG]

If a registered entity under Sec 12AA is renting  out commercial property  to a business entity , it is a taxable service and it attracts Service Tax irrespective of the fact that the proceeds there from are used for charitable activities.

[Aliasgar Tambawala]

Thanks Mr. James for your feedback.

One further clarification reqd. 

According to your goodself, what could be the services intended to be covered by the Legislature to imply services by way of charitable activities especially relating to advancement of religion or spirituality that clause 2(k) of the Mega Exemption Notification read with Entry at Serial no 4 of the Mega Exemption  notification  no. 25/2012  dated 20.6.2012 is referring to?

 

[JAMES PG]

The term" advancement of religion or spirituality" is not defined in the Finance Act or in any of the Notifications. Hence we have to refer to the dictionary meaning, which is given below:

Advancement - encouragement of the progress or growth or acceptance of something

Religion -belief in, worship of, or obedience to a supernatural power or powers considered to be divine or to have control of human destiny

Spirituality -the state or quality of being dedicated to God, religion, or spiritual things or values, especially  as contrasted with material or temporal ones

It can be briefed as "Encouragement of the belief in worship of powers considered to be divine or encouragement of  dedication to God or religion or spirituality"

Here it is pertinent to note the clarification given in Income Tax Act  also with regard to the exemption towards advancement of objects for public utility so as to have a some clarity on this

"As per clause (b) of section 96 “advancement of any other object of general public utility” shall not be a

permitted welfare activity if it involves the carrying on of any activity in the nature of trade, commerce or

business, or any activity of rendering any service in relation to any trade, commerce or business, for a

cess, fee or any other consideration, irrespective of nature of use, application or retention, of the income

from such activity"

AI Summary

Is Renting Out Commercial Property by Religious Trusts Under Section 12AA Subject to Service Tax? A discussion on a forum addresses whether renting out commercial property by a religious trust registered under section 12AA of the Income Tax Act is subject to service tax. The inquiry focuses on whether such activities fall under the 'charitable activities' exemption in Notification No. 25/2012-ST. A participant clarifies that renting to a business entity is taxable, regardless of the use of proceeds for charitable purposes. The term 'advancement of religion or spirituality' is not defined in the Finance Act, requiring reliance on dictionary definitions and related tax clarifications, which exclude activities resembling trade or commerce from exemptions.