TaxTMI 
TaxTMI 
2011 (9) TMI 46
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...., 1995 (for short „the 1995 Act‟) and Section 66 as amended by the Finance Act, 2010 (for brevity „the 2010 Act‟) is called in question. The matters were initially placed before a Division Bench wherein the learned counsel for the parties raised many a submission and regard being had to the nature of the cases, the Division Bench thought it appropriate that the controversy should be dwelled upon by a larger Bench. Thereafter, the matters have been placed before us. 2 For the sake of clarity and convenience, we shall advert to the facts adumbrated in W.P.(C) No.3398/2010 and deal with the contentions canvassed by the learned counsel for the parties in all the writ petitions as the issue is common to all. The petitioner, a registered company under the Companies Act, 1956, has taken commercial property / shops on rent for carrying on its retail business. It takes immovable property by way of lease or licence and once the lease deed or the deed of licence is entered with the owner, there is no continuous flow of transaction between them. The tenant is entitled to use the premises for a fixed tenure under the agreement and the transaction with the owner....
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.... v. Union of India, 158 (2009) DLT 722 (DB). 3. In the case of Home Solution Retail India Ltd. (supra), it was contended that the notification and circular had come into existence by absolute fallacious interpretation placed on Section 65(105)(zzzz) and Section 65(90)(a) inasmuch as an attempt has been made to levy service tax on renting of immovable property as opposed to the levy of service tax on the service provided "in relation to renting of immovable property". The Division Bench adverted to the language employed in the notification dated 22.5.2007 and the circular dated 4.1.2008 and after referring to the decisions in T.N. Kalyana Mandapam Association v. Union of India & Others, (2004) 5 SCC 632, All India Federation of Tax Practitioners & Ors. v. Union of India, (2007) 7 SCC 527, Doypack Systems Private Limited v. Union of India, (1998) 2 SCC 299, BSNL v. Union of India, (2006) 3 SCC 1, Commissioner of Income-tax, Bangalore v. B.C. Srinivasa Shetty, (1981) 2 SCC 460, Lucknow Development Authroity v. MK Gupta, (1994) 1 SCC 243, NS Nayak and Sons v. State of Goa, (2003) 6 SCC 56 and interpreting the terms "in relation thereto", distinguished the decision rendered in....
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....e said Act as per its context. Sometimes, „in relation to‟ would include the subject matter following it and on other occasions it would not. As in the case of the service of dry cleaning, the expression „in relation to dry cleaning‟ also has reference to the very service of dry cleaning. On the other hand, the service referred to in Section 65(105)(v), which refers to a service provided by a real estate agent „in relation to real estate‟, does not, obviously, include the subject matter as a service. This is so because real estate by itself cannot by any stretch of imagination be regarded as a service. Going back to the structured sentence, i.e.- service provided or to be provided to „A‟ by „B‟ in relation to „C‟, it is obvious that „C‟ can either be a service (such as dry cleaning, hair dressing, etc.) or not a service by itself, such as real estate. The expression "in relation to" would, therefore, have different meanings depending on whether „C‟ is a service or is not a service. If „C‟ is a service, then the expression „in relation to‟ means the service „....
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....tion of India. Such an examination has become unnecessary because of the view we have taken on the main plea taken by the petitioners as indicate above." [Emphasis added] 4. From the aforesaid decision, it is quite vivid that the Division Bench has held that Section 65(105)(zzzz) could not have brought in its ambit and sweep the renting out of immovable property for use in the course of furtherance of business or commerce to constitute a taxable service and thereby exigible to service tax and, accordingly, the notification and circular were declared ultra vires. 5. After the said decision was rendered, Section 65(90)(a) and Sections 65 and 66 were amended. For the purpose of better appreciation, the provision that existed prior to the Finance Act, 2010 and post amendment by the Finance Act, 2010 are produced below in a tabular form: PRIOR TO FINANCE ACT, 2010 POST AMENDMENT BY FINANCE ACT, 2010 "Section 65 (90a) "renting of immovable property" includes renting, letting, leasing, licensing or other similar arrangements of immovable property for use in the course or furtherance of business or commerce but does not include- (i) renting....
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.... clauses ....(zzzz).... of Clause (105) of Section 65 and collected in such manner as may be prescribed. "Section 65(105) "taxable service" means any service provided or to be provided - ... (zzzz) to any person, by any other person in relation to renting of immovable property for use in the course or furtherance of business or commerce. Explanation 1. - For the purposes of this sub-clause, "immovable property" includes- (i) building and part of a building, and the land appurtenant thereto; (ii) land incidental to the use of such building or part of a building; (iii) the common or shared areas and facilities relating thereto; and (iv) in case of a building located in a complex or an industrial estate, but does not include - All common areas and facilities relating thereto, within such complex or estate, but does not include- (a) vacant land solely under for "Section 66(105) "taxable service" means any service provided or to be provided - ... (zzzz) to any person, by any other person, by renting of immovable property or any other service in relation to such renting, for use in the course of or furtherance of business or commerce. Explanation 1. - For th....
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....e Parliament has no authority to enact the impugned legislation as renting of immovable property is a tax on lands and buildings which squarely comes within Entry 49 of List II of the Seventh Schedule of the Constitution of India. The learned senior counsel further submitted that the use of the word „taxes‟ in Entry 49 connotes a multitude of taxes imposable on land when the renting of an immovable property would squarely fall within Entry 49 of List II. Relying on the decision in State of West Bengal v. Kesoram Industries Ltd., (2004) 10 SCC 20, it is submitted that reading Entry 49 of List II in a wide manner, it would include all types of taxes imposed or imposable on lands and buildings and the same would fall within the exclusive authority of the State Legislature and in no manner would come within the residuary Entry 97 of List I by virtue of which the Parliament can legislate. He has propounded that the service tax imposed by the Parliament on renting of immovable property takes into account the use of the land or building, hence, it is a tax which the State Legislatures alone could conceivably impose under Entry 49 of List II. In order to buttress the aforesaid ....
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....r. Salve has further argued that in the light of the judgment rendered in Home Solutions (supra), renting by the landlord for commercial purposes to the tenant, per se, could not be construed as rendering of service. The concept of "service seeker" and "service provider" as enunciated in the Finance Act 1994 is wholly absent in the impugned legislation. He further submitted that the respondent‟s justification of the impost on the ground that the power to tax rests with the Parliament, employing deeming fiction to describe the tax as a service tax within the residuary power of the Parliament, is totally contrary to the constitution bench judgment of the Apex Court in Godfrey Phillips India Ltd. (supra) wherein it has been authoritatively pronounced that the Parliament cannot employ a deeming fiction to bring in an incident of tax or a taxable event within its fold. Highlighting the said proponement, it is urged that merely describing the tax to be a "service tax" would not alter the nature of the tax for being a tax on land and building and, therefore, the Parliament does not have the legislative competence to introduce a deeming fiction to tax renting of immovable property an....
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.... Europe SA [Case C-284/03 of 18.11.2004] wherein it has been held that if the leasing/ letting of immovable property is a passive transaction, then it would be exempted. 13. Mr. S. Ganesh, learned senior counsel, analysing the anatomy of the provisions under Section 65, submitted that among the taxable services, the taxable service in Sub-clause (zzzz), to which the constitutional challenge in these proceedings relates, was initially inserted by the Finance Act of 2007 with effect from 1st June 2007 and the taxable service was defined to mean "any service provided or to be provided to any person, by any other person in relation to renting of immovable property for use in the course or furtherance of business or commerce" and, hence, in the absence of service component, service tax cannot be imposed. Emphasis has been laid on the expression "renting of immovable property" as defined in Clause (90)(a) of Section 65 of the Act. 14. It is his submission that letting of immovable property is merely a property transaction and does not involve remotely any value addition whatsoever which results from the rendering of the service and therefore, the service tax is not le....
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....011) 2 SCC 352, delineated at the outset the essential features of service tax to mean that it is leviable only on services provided by the service provider to its customer and it is fundamentally and inseparably connected with the value addition. The learned senior counsel has further submitted that renting of immovable property for use in the course or furtherance of business or commerce by itself does not entail any value addition and, therefore, cannot be regarded as a service. 19. The learned senior counsel has placed reliance on Hansraj & Sons v. State of Jammu & Kashmir, (2002) 6 SCC 227, Member-Secretary, Andhra Pradesh State Board for Prevention and Control of Water Pollution v. Andhra Pradesh Rayons Ltd., (1989) 1 SCC 44, Saraswati Sugar Mills v. Haryana State Board, (1992) 1 SCC 418 and Commissioner of Gift Tax, Madras v. N.S. Getty Chettiar, (1971) 2 SCC 741 to reinforce his submission that the definition of „taxable service‟ is a matter which relates to chargeability and the charging provisions have to be strictly construed. 20. It is urged by Mr. Bagaria that the constitutional concepts relating to service tax as laid down by the Apex Court cannot be....
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....mitting the usage of immovable property in the course and furtherance of business which is neither covered under the Transfer of Property Act nor under the Indian Easements Act and by no means is a tax on land and building to come within the ambit and sweep of Entry 49 of List II of the Seventh Schedule of the Constitution. Combating the submission as regards the legislative competence of the Parliament, the learned Addition Solicitor General has submitted that in order to take aid of Entry 49 of List II, certain conditions precedent are to be satisfied such as the tax ought to be a direct tax on land and building, and the land or building is to be taxed as units of taxation as it has no concern with ownership, division of interest or occupation. That apart, submits Mr. Chandhiok, it does not cover indirect tax on land and building and as a natural corollary, ousts tax on income from land or building from its purview. It is canvassed by him that the tax in the present case is an indirect tax and the impost is on the activity and not on renting or leasing. It is canvassed by him that the subject of tax or the event of taxation is different from the measure of levy and the mode of as....
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....s permissible. 25. On the nature of service tax, the learned ASG submitted that besides the fact that service is inherent under Section 65(90a) and Section 65(105)(zzzz), there is value addition and the whole activity has an inseparable nexus with commercial activity. Emphasizing on the concept of Value Added Tax (VAT), it is submitted by him that VAT was based on the additional services and the related VAT liability of the service provider can be calculated by deducting input tax credit from the tax collected on the services making it a multi point tax on value addition which is collected at different stages of providing services with provision for set off for the tax paid at the previous stage / tax on inputs. In this regard, the learned ASG has referred to the statutory provisions of the Central Excise Act, 1944, the Finance Act, 1994 and the CENVAT Credit Rules, 2004, Dr. Raja J. Chelliah Committee‟s report on tax reforms as well as the decision in All India Federation of Tax Practitioners and Ors. (supra) wherein the Supreme Court has described service tax as VAT. 26. The learned ASG, justifying the retrospective operation of the impugned provisions, ....
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....isions in State of Madras v. Gannon Dunkerley & Co. Ltd., (1959) SCR 379, Bhopal Sugar Industries v. Sales Tax Officer, (1964) 1 SCR 481, Twentieth Century Finance Co. Ltd. v. State of Maharashtra, (2000) 6 SCC 12; All India Federation of Tax Practitioner's case (supra) Tamil Nadu Kalyanmandapam Association (supra) and Association of Leasing and Financial Service Companies (supra) have been pressed into service. 30. To appreciate the contentions raised at the Bar, first, we shall advert to the schematic concept pertaining to the "fields of legislation". In Raja Jagannath Baksh Singh v. State of Uttar Pradesh and another, AIR 1962 SC 1563, while dealing with Articles 245 and 246, it has been held that it is an elementary cardinal rule of interpretation that the words used in the Constitution which confer legislative power must receive the most liberal construction and if they are words of wide amplitude, they must be interpreted so as to give effect to that amplitude. It would be out of place to put a narrow or restricted construction on words of wide amplitude in the Constitution. A general word used in an entry must be construed to extend to all ancillary or subsidiary m....
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.... is impugned as being ultra-vires of the legislative competence, what is required to be ascertained is the true character of the legislation. If, on such an examination, it is found that the legislation is in substance one on a matter assigned to the legislature, then it must be held to be valid in its entirety even though it might incidentally trench on matters which are beyond its competence. In order to examine the true character of the enactment, the entire Act, its object and scope and effect is required to be gone into. The question of invasion into the territory of another legislation is to be determined not by degree but by substance. 32. In Dharam Dutta and others v. Union of India and others, AIR 2004 SC 1295, it has been held thus: "72. The various entries in the three Lists of the Seventh Schedule are legislative heads defining the fields of legislation and should be liberally and widely interpreted. Not only the main matter but also any incidental and ancillary matters are available to be included within the field of the entry. The settled rules of interpretation governing the entries do not countenance any narrow and pedantic interpretation. The judicial ....
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....d it to act are really irrelevant. On the other hand, if the legislature lacks competency, the question of motives does not arise at all. Whether a statute is constitutional or not is thus always a question of power (vide Cooley's Constitutional Limitations, Vol.1, p.379). The crucial question to be asked is whether there has been a transgression of legislative authority as conferred by the Constitution which is the source of all powers as also the separation of powers. A legislative transgression may be patent, manifest or direct, or may also be disguised, covert and indirect. It is to this latter class of cases that the expression "colourable legislation" has been applied in certain judicial pronouncements. The expression means that although apparently a legislature, in passing a statute, purports to act within the limits of its powers, yet in substance and in reality, it transgresses those powers, the transgression being veiled by what appears, on a proper examination, to be a mere pretence or disguise. The discerning test is to find out the substance of the Act and not merely the form or outward appearance. If the subject-matter in substance is something which is beyond the leg....
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....t the entries in the three lists are only legislative heads or fields of legislation and they demarcate the area over which the appropriate legislature can operate. The legislative entries must be given a large and liberal interpretation, the reason being that the allocation of subjects to the list is not by way of scientific or logical definition but is a mere enumeration of broad and comprehensive categories....." 36. We have referred to the aforesaid decisions only to understand the purpose behind the various entries relating to legislation by the Parliament as well as the State Legislature, the field of legislation, the doctrine of "pith and substance", adoption of a non-pedantic approach, interpretation on a wider spectrum, the true character of the enactment by paving the path of real substance, and the demarcation of the areas of legislation, incidental and ancillary encroachment, design of the statute and substantial entrenchment. 37. Presently, we shall proceed to refer to certain authorities which pertain to the imposition of tax on land as it is imperative to scan and understand what is exactly meant by "taxes on lands and buildings". Entry 49 of List II rea....
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....on lands and buildings is directly imposed on lands and buildings, and bears a definite relation to it. Tax on the capital value of assets bears no definable relation to lands and buildings which may form a component of the total assets of the assessee. By legislation in exercise of power under entry 86 List I tax is contemplated to be levied on the value of the assets. For the purpose of levying tax under entry 49 List II the State Legislature may adopt for determining the incidence of tax the annual or the capital value of the lands and buildings. But the adoption of the annual or capital value of lands and buildings for determining tax liability will not, in our judgment, make the fields of legislation under the two entries overlapping." 40. In The Assistant Commissioner of Urban Land Tax and others v. The Buckingham and Carnatic Co. Ltd., Etc., 1969 (2) SCC 55, the challenge was to the Madras Urban Land Tax Act, 1966. A contention was raised that the impunged Act fell in Schedule VII, List I, Entry 86 as the impugned Act was, both in form and substance, taxation of capital and, hence, beyond the competence of the State Legislature. In that context, their Lordships opi....
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....ich may form a component of the total assets of the assessee. By legislation in exercise of power under Entry 86, List I tax is contemplated to be levied on the value of the assets. For the purpose of levying tax under Entry 49, List II the State Legislature may adopt for determining the incidence of tax the annual or the capital value of the lands and buildings. But the adoption of the annual or capital value of lands and buildings for determining tax liability will not make the fields of legislation under the two entries overlapping. The two taxes are entirely different in their basic concept and fall on different subject-matters." [Emphasis added] 41. In The Second Gift Tax Officer, Mangalore v. D.H. Hazareth, AIR 1970 SC 999, the Apex Court, while dealing with the impost or tax on gifts of lands and buildings, referred to Article 248 which ("imposition of" or "impost of") contains declaration of the residuary powers of the Legislature. Their Lordships observed that the Parliament has exclusive power to make any law in respect of any matter not enumerated in the Concurrent List or State List and the same includes the power of making any law imposing a tax not mentioned in eit....
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....ct. The principal contention that was canvassed before the Apex Court was that the subject matter of the Act being a tax on building is a tax on the capital value of the asset of an individual or a company and falls within the scope of Entry 86 of List I of the Seventh Schedule of the Constitution and not under Entry 49 of List II and, therefore, it travels beyond the legislative competence of the State Legislature. Their Lordships referred to the concept of tax as defined under Clause (28) of Article 366 of the Constitution of India, adverted to Entry 86 and thereafter, while dealing with Entry 49, proceeded to state as follows: "8. On the other hand, Entry 49 of List II is as follows: 49. Taxes on lands and buildings. If therefore a tax is directly imposed on "buildings", it will bear a direct relation to the buildings owned by the assessee. It may be that the building owned by an assessee may be a component of his total assets, but a tax under Entry 86 will not bear any direct or definable relation to his building. A tax on "buildings" is therefore a direct tax on the assessee‟s buildings as such, and is not a personal tax without reference to any particular prop....
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....ax is clearly mentioned in List II, the same would not be available to be exercised by the Parliament based on the presumption of residuary power. In the said case, while dealing with the concept of land in terms of Entry 49, List II, it has been stated that it has wide connotation and the land remains land though it may be subject to different uses. The nature of use of the land would not enable a piece of land to be taken out of the meaning of land itself. It has been ruled therein that to be a tax on land, the levy must have some direct and definite relationship with the land and so long as the tax is a tax on land by bearing such relationship with the land, it is open to the legislature, for the purpose of levying tax, to adopt any one of the well known modes of determining the value of the land such as annual or capital value of the land or its productivity. It has been further held that the methodology adopted, having an indirect relationship with the land, would not alter the nature of the tax as being one on the land. The Constitution Bench has also laid emphasis on the aspect that the primary object and the essential purpose of the legislation must be distinguished from it....
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....levy of tax on lands and buildings or both as units. (c) The levy of tax on lands and buildings is not concerned with the division of interest or ownership in the units of lands or buildings which are brought to tax. Tax on lands and buildings is directly imposed on lands and buildings and bears a definite relation to it. (d) The tax on land and building is a fundamental tax resting upon the general ownership of the lands and buildings but would not include a particular act like a transmission of title by gift. (e) There is a distinction between a direct tax on the assessee‟s building as such and a personal tax. (f) There is a distinction between the elements of tax, namely, the person, thing or activity on which the tax is imposed and the amount of tax. (g) A tax may imperceptibly be the subject-matter of tax like wealth tax and may be subjected to tax as a direct tax under Entry 49 of List II. (h) To be a tax on land, the levy must have some direct and definite relationship with the land and as long as the tax is a tax on land by bearing such relationship with the land, it is open to the State legislature, for the purpose of levying tax, to a....
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...., 1994 and other provisions relating to Kalyana Mandapams and Mandap keepers. Sub- sections 65(8), (19) and (20) of the Finance Act, 1994 defined „caterer‟, „mandap‟ and „mandap keepers‟. Section 65(41)(p) defines „taxable service‟ to mean any service provided to a client by a mandap keeper in relation to the use of a mandap in any manner including the facilities provided to the client in relation to such use and also the services, if any, rendered as a caterer. The challenge to the constitutional validity before the High Court had met with failure. Before the Apex Court, it was the principal contention that the service tax on the mandap keepers is a colourable legislation and unconstitutional as the said tax is not on services but is, in pith and substance, only a "tax on goods" and/or land and the provisions are not within the legislative competence of the Union of India but within the competence of the State Legislature. Their Lordships posed six questions, one of which being relevant is reproduced hereinbelow: "Was the High Court correct in not construing the specific entries in List II viz. Entries 18, 49 and 54 by giving the ....
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.... other kind of legal concept. It does not certainly involve transfer of movable property nor does it involve transfer of movable property of any kind known to law either under the Transfer of Property Act or otherwise and can only be classified as a service." 49. In Gujarat Ambuja Cement Ltd. v. Union of India, AIR 2005 SC 3020, the challenge was to the legislative competence of the Parliament to impose service tax on carriage of goods by transport operators. It was urged that the matter came exclusively under Entry 56 of List II of the Seventh Schedule which pertains to "taxes on goods and passengers covered by road or inland water ways". Their Lordships noted that service tax is distinct from a tax on the sale or hire purchase of goods and from a tax on land. While dealing with the specific issue, the Apex Court has stated thus: "32. It is clear therefore that Section 66 read with Section 65(41)(j) and (ma) Chapter V of the Finance Act, 1994 do not seek to levy tax on goods or passengers. The subject matter of tax under those provisions of the Finance Act, 1994 is not goods and passengers, but the service of transportation itself. It is a levy distinct from the levy ....
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....g of service tax. While dealing with the concept and meaning of service tax, their Lordships opined that the concept of service tax is an economic concept. Thereafter, the Apex Court proceeded to state that as an economic concept, there is no distinction between the consumption of goods and consumption of service as both satisfy human needs. It is this economic concept based on the legal principle of equivalence which now stands incorporated in the Constitution vide the Constitution (Eighty-eighth Amendment) Act, 2003. Further, it is important to note that "service tax" is a value added tax which, in turn, is a general tax which applies to all commercial activities involving production of goods and provision of service. Moreover, VAT is a consumption tax as it is borne by the client, that is, the person who enjoys the benefit or avails the service. Thereafter, their Lordships referred to the decision in Moti Laminates (P) Ltd. v. CCE, (1995) 3 SCC 23 and opined thus: 24. The importance of the above judgment of this Court is twofold. Firstly, applying the principle of equivalence, there is no difference between production or manufacture of saleable goods and production of ....
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.... a chartered accountant/cost accountant/architect for consideration. Service tax is a tax on each activity undertaken by a chartered accountant/cost accountant or an architect. The cost accountant/chartered accountant/architect charges his client for advice or for auditing of accounts. Similarly, a cost accountant charges his client for advice as well as doing the work of costing. For each transaction or contract, the chartered accountant/cost accountant renders profession based services. The activity undertaken by the chartered accountant or the cost accountant or an architect has two aspects. From the point of view of the chartered accountant/cost accountant it is an activity undertaken by him based on his performance and skill. But from the point of view of his client, the chartered accountant/cost accountant is his service provider. It is a tax on "services". The activity undertaken by the chartered accountant or cost accountant is similar to saleable or marketable commodities produced by the assessee and cleared by the assessee for home consumption under the Central Excise Act. 35. For each contract, tax is levied under the Finance Acts, 1994 and 1998. Tax cannot be ....
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....ist II and the service would fall under Entry 92-C/97 of List I. Be it noted, it has been held therein that service tax is a value added tax and the value addition is on account of activities like planning, consultation, advising, etc. It is an activity which provides value addition as in the case of manufacture of goods which attracts excise duty. Their Lordships, in the said case, opined that the tax falls on the activity which is the subject matter of service tax, if the word "service" is to be substituted in the place of goods by applying the principle of equivalence. 51. In Association of Leasing and Financial Service Companies (supra), while dealing with the validity of Sections 65(12) and 65(105)(zm) of the Finance Act, 1994 as amended which pertain to the levy of service tax on leasing and hire-purchase, the Apex Court, after referring to the decisions in D.H. Hazareth (supra), Ujagar Prints (II) v. Union of India, (1989) 3 SCC 488, International Tourist Corporation (supra) and Goodricke Group Ltd.(supra), has held thus: "59. Applying the above decisions to the present case, on examination of the impugned legislation in its entirety, we are of the view t....
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....s in case of „consumption of goods‟ satisfies human needs. (vii) Service tax is a value added tax which, in turn, is a general tax applicable to all commercial activities involving provision of service. (viii) Value added tax is a general tax as well as destination based consumption tax leviable on services provided within the country. (ix) The principle of equivalence is in-built into the concept of service tax. (x) The activity undertaken in a transaction can have two components, namely, activity undertaken by a person pertaining to his performance and skill and, secondly the person who avails the benefit of the said performance and skill. In the said context, the two concepts, namely, activity and the service provider and service recipient gain significance. 53. Having enumerated the principles relating to the fields of legislation, the situations and circumstances when a levy on tax on land comes under Entry 49 of List II and what in conceptual essentiality covers the facet of service tax, it is presently seemly to dwell upon the three major submissions which have been astutely canvassed in different ways by the learned counsel at the Ba....
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.... the power of the State Legislature. That might affect and jeopardize the very federal principle. The federal nature of the Constitution demands that an interpretation which would allow the exercise of legislative power by the Parliament pursuant to the residuary powers vested in it to trench upon the State legislation and which would thereby destroy or belittle state autonomy must be rejected. In the said case, it has been further opined that where the competing entries are an entry in List II and Entry 97 of List I, the entry in the State List must be given a broad and plentiful interpretation. 55. In Harbhajan Singh Dhillon (supra), it has been held thus: "59. It was also said that if this was the intention of the Constitution makers they need not have formulated List I at all. This is the point which was taken by Sardar Hukam Singh and others in the debates referred to above and was answered by Dr. Ambedkar. But apart from what has been stated by Dr. Ambedkar in his speech extracted above there is some merits and legal effect in having included specific items in List I for when there are three lists it is easier to construe List II in the light of Lists I and II. If there....
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.... residuary entry, the legislation would nonetheless be immune from the attack on the ground of legislative competence." After so stating, their Lordships proceeded to state that with the advancement of society, expanding horizons of scientific and technical knowledge, probe into the mystery of creation, it is impossible to conceive that every imaginable head of legislation within human comprehension and within the foreseeable future could have been within the contemplation of the founding fathers and was, therefore, specifically enumerated in one or the other of the three Lists, meaning thereby that the three Lists were exhaustive of Governmental action and activity. Elaborating further, their Lordships stated that the demands of the welfare State, hopes and aspirations and expectations in a developing society and the complex world situation with inter-dependence and hostility amongst nations may necessitate legislation on some such topics which may be inconceivable even for visionaries and, hence, could not have been within the contemplation of the founding fathers. Complex modern governmental administration in a federal set up providing distribution of legislative powers coupl....
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....try could be held to embrace is inapposite while dealing with a tax which is sui generis or non-descript imposed in exercise of the residuary powers so long as such tax is not specifically enumerated in Lists II and III. 60. As the tabular chart that we have reproduced would clearly show, Section 65 is the provision which deals with the charging of service tax. Section 66(105) defines taxable service to mean any service provided or to be provided to any person, by any other person by renting immovable property or any other service in relation to such renting for use in the course of or furtherance of business or commerce. Section 65(90a) has been amended in 2010 to mean renting of immovable property which includes renting, letting, leasing, licensing or other similar arrangements of immovable property for use in the course or furtherance of business or commerce but does not include certain aspects. Explanation No.1 to the said provision provides that "for use in the course or furtherance of business or commerce" includes the use of immovable property as factories, office buildings, warehouses, theatres, exhibition halls and multiple-use buildings. Explanation 2 further declares ....
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....andapam Assn. (supra), submits that the concept of service, as is understood by a layman, is not applicable to the concept of taxing statute under the constitutional framework. He would further contend that once this Court holds that the levy does not pertain to a tax on land or building but an activity like renting, leasing, licensing or other similar arrangements of immovable property for use in the course or furtherance of business or commerce, it would come within the residuary power of the Parliament and the same should put the controversy to rest. 62. As presently advised, we shall dwell upon the concept of value addition. The hub of the matter is when a premise is let out for use, should a person who rents an immovable property or renders any other service in relation to such letting for use in the course or furtherance of business or commerce be liable to service tax. 63. The Division Bench in the first Home Solution case (supra), as we have reproduced hereinbefore, has opined that renting of immovable property for use in the course or furtherance of business or commerce by itself would not constitute service as there is no value addition. In the diction....
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.... capital invested. To give an example, a tenant pays Rs. 20,000/- per year as contract rent but the interest on capital invested is Rs. 3,000/- per year. Thus, the remaining amount, that is, Rs. 17,000/- (Rs.20,000.00 - Rs. 3,000.00) is paid for the use of the land. 65. The concept of economic rent can also represent an amount which a factor can earn in its next best alternative use. To give an example, a piece of land yields in a particular use Rs. 5,000 in a year. If it is transferred to its next best use, it can earn a better income. At one point of time, the Theory of Rent was propagated by David Ricardo. According to the Ricardian theory, rent has differential surplus and the same arises due to certain facets relating to fertility, productivity, extensive cultivation, quality, etc. Ricardo fundamentally considered rent as a surplus accruing to superior land over inferior land called "marginal land". It also depended upon shifting of population. Be it noted, the rent varies depending upon advantages. To give an example, two decades back, a market is established in zone „A‟, thereafter, a railway station starts in another zone called „B‟. The co....
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....liar to land alone but arises in the case of many a factor which earn over and above the transfer earnings. There is a distinction between "actual earnings" and "transfer earnings". According to the modern analysis of rent, it is not peculiar to land alone and the concept of transfer earning is more attracted towards the building depending upon its use. As an economic concept, it has been developed that rent qua building or premises or, for that matter, land has a nexus, an inseparable one, with the potentiality of its use in a competitive market. The economic growth has an effect on rent. In this regard, modern economists have evolved certain methods, namely, technical progress in methods of production, development in means of transportation and population growth. We have referred to these concepts only to highlight that the legislature has not imposed tax on mere letting but associated it with business or commercial use. Thus, it comes within the concept of activity and the value addition is inherent. It is worth noting that the language employed in the dictionary clause and the charging section, that is, "commercial use for business purposes" have their own significance. In Blac....
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....rovision. The learned counsel for the petitioners have submitted that the tax and the penalty could not have been imposed with retrospective effect. It is worth noting that the Parliament, keeping in view the first Home Solution case, substituted sub-clause (zzzz) in the present incarnation and gave retrospective effect to cure the deficiency. It is well settled in law that it is open to the legislature to pass a legislation retrospectively and remove the base on which a judgment is delivered. The said view has been stated in Bakhtawar Trust and others v. M.D. Narayan and others, (2003) 5 SCC 298. In the said case, in paragraphs 20 and 26, it has been held thus: "20. In Vijay Mills Company Ltd. and Ors. v. State of Gujarat and Ors., (1993) 1 SCC 345, it was held- "18. From the above, it is clear that there are different modes of validating the provisions of the Act retrospectively, depending upon the intention of the legislature in that behalf. Where the Legislature intends that the provisions of the Act themselves should be deemed to have been in existence from a particular date in the past and thus to validate the actions taken in the past as if the provisions....