TaxTMI 
TaxTMI 
2023 (7) TMI 583
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....un, conduct, manage operate and market the same in the name and style as Palmgrove may from time to time in its absolute discretion deem fit. The appellant has vested the possession of the said property with Palmgrove for an initial period of 50 years and renewable for another 50 years. Palmgrove was permitted to run, conduct, manage and operate the hotel on its own or grant it to third parties of its choice. In terms of Clause 9A of the agreement the appellant is eligible for royalty which is a percentage of operating income. Apart from this the appellant is also eligible for an interest free refundable deposit of Rs.11 crores which will be refunded on the expiry of the initial period of the agreement or the renewal thereof. The department based on investigation issued Show Cause Notice No.605/2011 dated 13.12.2011 for the period 01.06.2007 to 30.09.2011 proposing to levy service tax under renting of immovable property services by invoking the extended period of limitation. The department alleged that the appellant has rented out the immovable property for conducting hotel and other business and therefore the appellant is liable to pay service tax under renting of immovable proper....
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....sidential / accommodations such as hotels are excluded from the scope of renting of immovable property services. It was submitted that there is no justification for invoking the extended period of limitation since none of the ingredients of proviso to Section 73 are present. The appellant was under a bonafide belief as to non-applicability of service tax. 6. The learned AR on behalf of Revenue submitted that this is a case in which the appellant has handed over immovable and movable property to M/s. Palm Grove for running the hotel business. All the employees have left the services or their services have been terminated. The agreement clearly shows that the appellant has no say in the day-to-day business of the hotel right from the appointment of staff and running of the hotel. Therefore, there is no merit in the appellants argument that there is a business arrangement with Palm Grove. Although the appellant has contended that only a percentage of operating income is received and therefore no service tax is payable by them is not correct. It is relevant to state that just because the consideration is termed as 'royalty' and the quantum of consideration as agreed upon as a variab....
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....eld. 7. We have gone through the appeal papers and have heard the opposing parties. We find that it involves a case of the appellant allowing a hotel company, as per a written agreement, to run the hotel owned by it at an annual fee equivalent to a certain percentage of the annual turn-over of the said hotel. We agree with Revenue that a principle for interpretation of an activity, is that the nomenclature assigned to it is not decisive of its nature. Further the fact that a method of payment is worked out or calculated in a particular manner, as a consideration for the agreement, as per the convenience of the parties involved, is not in itself determinative of the nature of the service being offered. The method of collection of consideration does not affect the essence of the service so long as a service is actually rendered. We also note Revenue's averments with reference to the coordinate Bench of this Tribunal's judgment in the case of M/s. Spencer International Hotels Ltd. Vs. CGST & Central Excise vide Final Order No. 40461 to 40462 of 2023 dated 22.6.2023 that, the amount received by the appellant from M/s. IHCL (company that had taken the hotel for doing business) is not....
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....ure, farming, forestry, animal husbandry, mining purposes; (b) vacant land, whether or not having facilities clearly incidental to the use of such vacant land; (c) land used for educational, sports, circus, entertainment and parking purposes; and (d) building used solely for residential purposes and buildings used for the purposes of accommodation, including hotels, hostels, boarding houses, holiday accommodation, tents, camping facilities. Explanation 2 - For the purposes of this sub-clause, an immovable property partly for use in the course or furtherance of business or commerce and partly for residential or any other purposes shall be deemed to be immovable property for use in the course or furtherance of business or commerce." 5.2 From an analysis of the above definitions, in our opinion, to fall within the taxable entry of "renting of immovable property", the immovable rented out should be the genre exemplified in Explanation 1 reproduced supra. In the present case, however, the agreement between the appellant and IHCL is not merely for renting of the hotel or land appurtenant thereto etc., but is "license to run, conduct and operat....