2016 (4) TMI 1173 - HC - Service Tax

Allotment of land on lease basis - setting up an establishment for manufacturing IMFL, Winery and a Mini Brewery Unit - whether the transaction is amenable to service tax and the same has to be paid? - Held that - A perusal of Section 65(90a) and Section 65(105)(zzzz) of the Finance Act, 1994 as quoted in the letter dated 23-11-2015 clearly shows that Renting of Immovable Property Service includes renting, letting, leasing, licensing or other similar arrangements amounts to providing service and under Section 65(105)(zzzz) it is a taxable service. What is taxable is the consideration for the transfer. Even if premium is charged that is like charging of one time rent and then rebate is given for the yearly rent to be paid. Premium is also part of the lease money. Therefore, the entire transaction both premium and rent are amenable to service tax and service tax will have to be paid on the same. Petition dismissed - decided against petitioner.

Summary

Issues:
1. Petition for writ of certiorari to quash communications dated 19-2-2016 and 1-3-2016.
2. Applicability of service tax on land premium money for leased land.

Analysis:

*Issue 1: Petition for writ of certiorari*
The petitioner, a Private Limited Company, applied for 4 acres of land to set up manufacturing units. The Tripura Industrial Development Corporation (TIDC) provisionally allotted the land but demanded a sum of ?20 lacs as land premium money and ?2,47,200/- as service tax. The petitioner deposited the land premium but not the service tax. The Assistant Commissioner confirmed the applicability of service tax on the transaction. The petitioner challenged a subsequent communication demanding the service tax. The court refused to issue notice in the writ petition, citing that renting of immovable property amounts to providing a service and is a taxable service under the Finance Act, 1994.

*Issue 2: Applicability of service tax on land premium money*
The petitioner argued that only the rent, not the premium, is taxable. The court disagreed, stating that the consideration for the transfer, including premium and rent, is subject to service tax. The court clarified that premium is part of the lease money and is considered a capital investment. The court dismissed the petition, emphasizing that the entire transaction, including premium and rent, is liable for service tax. The court found no merit in the petitioner's submissions and dismissed the petition without costs.

In conclusion, the court upheld the applicability of service tax on the land premium money for the leased land, rejecting the petitioner's arguments regarding the taxation of premium and rent. The judgment emphasizes that the entire transaction, including premium, is subject to service tax under the Finance Act, 1994.