https://www.taxtmi.com/css/info/rss_sitemap/rss_feed.css?v=1746094055 https://www.taxtmi.com Business/Tax/Law/GST/India/Taxation/Policies/Legal/Corporate Tax/Personal Tax/Vat Law/Legal Information/Tax Information/Legal Services/Tax Services Tax Management India. Com / MS Knowledge Processing Pvt. Ltd. All rights reserved. One stop solution for Direct Taxes and Indirect Taxes https://www.taxtmi.com/caselaws?id=769274 https://www.taxtmi.com/caselaws?id=769274 Classification of service - Renting of Immovable Property Service or not - transaction of transferring leasehold rights for a period of 99 years by the appellant to sub-lessees - levy of service tax under the category of Business Auxiliary Service (BAS), given the nature of the receipts involved - time limitation. Classification of service - Renting of Immovable Property Service or not - transaction of transferring leasehold rights for a period of 99 years by the appellant to sub-lessees - HELD THAT:- The one time Premium received by the Appellant cannot be equated with rent payable on regular intervals for continuous use of the property. The difference between the Premium or Salami and the lease rent as envisaged in Section 105 of the Transfer of Property Act, 1882, has been dealt in the decision of the Hon'ble High Court in the case of AR KRISHNAMURTHY AND AR RAJAGOPALAN VERSUS COMMISSIONER OF INCOME-TAX, MADRAS [1980 (12) TMI 33 - MADRAS HIGH COURT]. From the decision, it is observed that the price paid for transfer of possession or the right to enjoy the property is called the 'Premium or Salami' and the periodical payments made for continuous use of the property under lease is called 'rent'. The Applicant has received only a one-time payment as Premium and hence by relying on the above decision it becomes clear that the Premium received by the Appellant cannot be called as 'rent'. The difference between the 'Premium' and 'Rent' has been highlighted in the Judgment of the Hon'ble Supreme Court in the case of Commissioner of Income Tax v. The Panbari Tea Co. Ltd., [1965 (4) TMI 19 - SUPREME COURT]. From the aforesaid judgement, it is observed that consideration, i.e. one-time payment, in the form of Premium or Salami and consideration in the form of 'rent' connotes two different types of consideration. In the instant case, the Applicant has not received any 'rent' from the sub-lessees. Accordingly, the premium or salami paid to the Applicant for transfer of right in the property, should not be exigible to the service tax. The one time Premium/ Salami received by the appellant from the sub- lessee is not a consideration towards the taxable service of 'Renting of Immovable Property'. Levy of service tax under the category of Business Auxiliary Service (BAS), given the nature of the receipts involved - HELD THAT:- The impugned Order does not specify under which clause of "BAS" the aforesaid charges would fall. Accordingly, it is held that demand of service tax confirmed under the category of 'BAS' is not sustainable without specifying the particular Clause under the definition of 'BAS'. Accordingly, the demand confirmed under the category of 'BAS' in the impugned order is not sustainable. Time Limitation - HELD THAT:- In this case, the Show Cause Notice was issued after a period of 18 months. We also observe that the taxability on this issue has been subject matter of dispute at various forums. Also, it is a fact on record that the demand has been calculated from the audited financial statements. Thus, there is no suppression of fact with intention to evade the tax established in this case. Accordingly, the demand is also barred by limitation. Since, the demand of service tax is not sustainable, the question of demanding interest and imposing penalty does not arise. Conclusion - i) The one time Premium/ Salami received by the appellant from the sub- lessee is not a consideration towards the taxable service of 'Renting of Immovable Property'. ii) Demand of service tax confirmed under the category of 'BAS' is not sustainable without specifying the particular Clause under the definition of 'BAS'. iii) There is no suppression of fact with intention to evade the tax established in this case, the demand is also barred by limitation. iv) Since, the demand of service tax is not sustainable, the question of demanding interest and imposing penalty does not arise. Appeal allowed. Case-Laws Service Tax Thu, 14 Nov 2024 00:00:00 +0530