Applicability of service tax on 'renting of immovable property'

[Guest]

Whether the levy of tax on 'renting of immovable property' covers sharing of business premises between group companies. For example, If company 'A' taken the premises on rent for a monthly rent of Rs.50000/- and pays the rent to Owner. The owner may or may not levy service tax, depending upon his annual service income. If 'A' company allows portion of premises to be occupied by its group company 'B'and recovers proportionate rent (without any additional mark up), whether such sharing of rent would also attract service tax?

[Surender Gupta]

Whether the activity in query is sharing of property or sub-letting has to be examined carefully. Sub-letting activity is certainly a taxable activity.

[Madhukar N Hiregange]

I agree with Mr. Gupta. The sub letting activity would be liable but the sharing of expenses in our opinion is not taxable whether of rent or other servcies.

AI Summary

Sub-letting liability: sharing premises with group companies treated as taxable supply, while mere cost-sharing is not. Whether recovery from a group company for occupation of part of rented premises is taxable hinges on characterization: genuine cost sharing among co occupants is not taxable, whereas a distinct grant of occupation rights in return for payment constitutes sub letting and falls within the taxable renting of immovable property service.