2014 (10) TMI 971 - AT - Service Tax

Liability of service tax - Notional interest accrued on security deposits for renting of immovable property - Held that - this issue has been extensively considered by this Tribunal in the case of Magarpatta Township Developers & Construction Co. 2014 (9) TMI 461 - CESTAT MUMBAI wherein this Tribunal held that notional interest on security deposit cannot be added to rent agreed upon between the parties for the purpose of levy of service tax for renting of immovable property - appellant is not required to pay service tax on notional interest on security deposit under the category of renting of immovable property service - appeal allowed - decided in favor of appellant.

Summary

Issues involved: Whether the appellant is required to pay service tax on notional interest accrued on security deposits for renting of immovable property is liable to service tax or not.

Analysis:

The judgment by the Appellate Tribunal CESTAT Mumbai, delivered by Mr. Ashok Jindal, addresses the issue of whether the appellant is liable to pay service tax on notional interest accrued on security deposits for renting of immovable property. The appellant argued that the security deposit is refundable and is meant to secure defaults in payment of charges by the lessee, contending that notional interest on security deposits should not be subject to service tax under the category of renting of immovable property service. The appellant relied on a previous decision of the Tribunal in the case of Magarpatta Township Developers & Construction Co. Ltd. to support this argument.

On the other hand, the respondent supported the impugned order, leading to a thorough consideration by the Tribunal. The Tribunal referred to its earlier decision in the case of Magarpatta Township Developers & Construction Co., where it was held that notional interest on security deposits should not be included in the calculation of service tax for renting of immovable property. Based on this precedent, the Tribunal concluded that the appellant is not obligated to pay service tax on notional interest on security deposits under the category of renting of immovable property service.

In light of the above analysis, the Tribunal set aside the impugned order and allowed the appeal with any consequential relief deemed necessary. This judgment provides clarity on the taxability of notional interest accrued on security deposits in the context of renting of immovable property, aligning with the precedent set by previous Tribunal decisions.