2013 (6) TMI 643 - AT - Service Tax

Renting of Immovable Property - taxability of lease of factory premises with plant and machinery - taxability of amount received towards maintenance and repair charges to keep the plant and machinery in good condition - Held that - There is no dispute in the instant case that the property rented out is an immovable property and the renting has been for use for the furtherance of business or commerce. The transaction undertaken by the appellant fails within the definition of renting of immovable property as defined in Section 65(105)(zzzz) above and, therefore, the appellant is prima facie, liable to pay service tax on the rent amounts received by them. As regards the maintenance and repair costs incurred by the lessee, we are of the prima facie view that the appellant is not the service provider and there is no liability on the appellant in respect of those transactions. Since the appellant has already paid the service tax amount on the lease amount received, though under protest, the same is sufficient for hearing of the appeals. - stay granted.

Summary

Issues:
1. Liability of the appellant for service tax on rent received for leasing out immovable property.
2. Liability of the appellant for service tax on maintenance and repair costs incurred by lessees.

Issue 1: The judgment addresses the liability of the appellant, a cooperative bank engaged in banking and financial services, for service tax on the rent received for leasing out immovable property. The appellant leased factories to lessees to recover outstanding loan amounts from defaulting loanees. The Revenue argued that the leasing activity falls under the category of 'Renting of Immovable Property' as per Section 65(105)(zzzz) of the Finance Act, 1994. The appellant contended that their actions were for loan recovery, not renting property, and thus not liable for service tax. The tribunal found that the rented properties were immovable and leased for business purposes, meeting the definition of 'renting of immovable property.' Consequently, the appellant was held prima facie liable to pay service tax on the rent amounts received.

Issue 2: The judgment also considered the appellant's liability for service tax on maintenance and repair costs incurred by lessees. The appellant argued that they were not the service provider for these activities and should not be liable for service tax. The tribunal agreed, stating that the appellant was not the service provider for maintenance and repair, absolving them of liability for service tax on these charges. As the appellant had already paid service tax on the lease amount received, the tribunal deemed it sufficient for the appeals' hearing. Consequently, the tribunal granted a waiver from pre-deposit of the remaining dues adjudged against the appellant and stayed recovery during the appeal's pendency.