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?

AI Summary

Service tax on rental services: renting commercial property to a business is taxable despite charitable use of proceeds.
Exemption covers "services by an entity registered under section 12AA by way of charitable activities," including advancement of religion or spirituality, but renting commercial property to a business entity is a taxable service attracting service tax even if receipts are used for charitable or religious purposes; the nature of the service, not merely application of proceeds, determines exemption, and ordinary meanings inform the undefined concept of "advancement of religion or spirituality."