TaxTMI 
TaxTMI 
2026 (9) TMI 1600
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....andum dated 01.06.2006.The Appellant incurred common expenditure in relation to the premises such as maintenance charges, electricity charges, municipal taxes and other outgoings. The agreed mechanism as per Clause 6 of the Memorandum was merely to recover from MPBN its proportionate share of such common expenditure, based on the area allotted and expected utilization of the common facilities. During departmental audit in 2016, an objection was raised that the amount recovered from MPBN as reimbursement of expenses should be included in taxable value under Section 67 of the Finance Act, 1994 read with Rule 5 of the Service Tax (Determination of Value) Rules, 2006. The Appellant disputed the audit objection by its reply dated 22.03.2016. Thereafter, Show Cause Notice dated 08.04.2016 was issued proposing recovery of Service Tax amounting to Rs. 42,78,828/- along with interest and penalty, principally on the allegation that the said arrangement constituted "Renting of Immovable Property" and that the reimbursements represented consideration for the same and therefore the money collected should be treated as taxable in terms of Section 67 of the Finance Act, 1994 read with Rule 5(1) o....
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....MC of AC plant 22% of total bill CMC of 4 Lifts of no. 10 Loudon Street 44.10% of total bill CMC of Telephone EPABX of no. 10 Loudon Street 45.87% of total bill Fire Insurance of no. 10 Loudon Street 44.10% of total bill Others of miscellaneous nature having common interest 50% of total expenses Payable : Car Parking payable to PBAEH 50% of total receipt 2.4 The Appellant states that acting on a bona fide understanding that a mere recovery of proportionate common expenses did not constitute consideration for any taxable service, and accordingly the Appellant did not collect Service Tax from MPBN on such reimbursements and did not discharge Service Tax on the same. 2.5 The Ld. Adjudicating Authority confirmed the demand of Rs. 42,78,828/- with interest and equal penalty. While doing so, the authority himself recorded the contractual stipulation that the Appellant would not charge any rent from MPBN, but nevertheless treated the reimbursements of maintenance, electricity, municipal taxes and other outgoings as consideration by applying Section 67 read with Rule 5(1) of the Service Tax (Determination of Value) Rules....
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..... In paragraph 29 of the judgment, the Hon'ble Supreme Court specifically noticed that Section 67, as it stood prior to 14.05.2015, did not include reimbursable expenditure or cost within the scope of consideration. It was only by virtue of the amendment made by the Finance Act, 2015 with effect from 14.05.2015 that the expression "consideration" was expanded so as to include reimbursable expenditure or cost incurred by the service provider and charged in the course of providing or agreeing to provide a taxable service. 2.11 The Appellant submits that the Hon'ble Supreme Court further held that the amendment brought about with effect from 14.05.2015 was a substantive change and, therefore, was prospective in operation. Thus, reimbursable expenditure or cost became includible in the valuation of taxable services only from 14.05.2015 and not for any period prior thereto. 2.12 The Appellant submits that the reimbursements received by the Appellant towards common maintenance, electricity, municipal taxes and other outgoings cannot be included in the value of the alleged renting service for the disputed period. The impugned demand, being computed entirely on such reimbursements, i....
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....edly, the appellant has given part of their premises to the Eye Care unit [MPBN], without charging any Rent as such for the accommodation provided. For providing the space of this purpose, the parties have entered into a Memorandum dated 1.6.2006. The relevant portion of this Memorandum is reproduced below: Clause 1 records that the Eye Hospital would be maintained and run by MPBN in the allotted area. Clause 2 records that the parties had collaborated for creation of the facilities of the Eye Hospital and Clause 6"The monthly maintenance charges, electricity charges, municipal rates and taxes and other outgoings in respect of the area allocated to Eye Hospital incurred and/or paid by BVC shall be reimbursed to it by MPBN. BVC, for the time being, will not charge any rent from MPBN for the ear-marked area." Clause 15 specifically records that no transfer of any right, title or interest whatsoever in the allotted area was intended or given in favour of MPBN. The amount to be reimbursed by MPBN is as per the following Table: Details of Realisable Share of PBAEH Electricity bill of no. 9 Loudon Street 7% of total bill Electricity b....
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.... "24) In this hue, the expression 'such' occurring in Section 67 of the Act assumes importance. In other words, valuation of taxable services for charging service tax, the authorities are to find what is the gross amount charged for providing 'such' taxable services. As a fortiori, any other amount which is calculated not for providing such taxable service cannot a part of that valuation as that amount is not calculated for providing such 'taxable service'. That according to us is the plain meaning which is to be attached to Section 67 (unamended, i.e., prior to May 01, 2006) or after its amendment, with effect from, May 01, 2006. Once this interpretation is to begiven to Section 67, it hardly needs to be emphasised that Rule 5 of the Rules went much beyond the mandate of Section 67. We, therefore, find that High Court was right in interpreting Sections 66 and 67 to say that in the valuation of taxable service, the value of taxable service shall be the gross amount charged by the service provider 'for such service' and the valuation of tax service cannot be anything more or less than the consideration paid as quid pro qua for rendering such a service." 10. The....
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.... or selling agent from gross sale amount of lottery ticket in addition to the fee or commission, if any, or, as the case may be, the discount received, that is to say, the difference in the face value of lottery ticket and the price at which the distributor or selling agent gets such ticket.] *Substituted vide THE FINANCE ACT, 2015 w.e.f. 14th May 2015, before it was read as, "(a) "consideration" includes any amount that is payable for the taxable services provided or to be provided;" 12. As to whether this amendment brought in would have retrospective / prospective effect, was also considered by the Hon'ble Supreme Court in the case of cited decision of Intercontinental, which has held as under: "29) Realising that Section 67, dealing with valuation of taxable services, does not include reimbursable expenses for providing such service, the Legislature amended by Finance Act, 2015 with effect from May 14, 2015, whereby Clause (a) which deals with 'consideration' is suitably amended to include reimbursable expenditure or cost incurred by the service provider and charged, in the course of providing or agreeing to provide a taxable service. Thus, only with effect ....