2015 (5) TMI 343 - AT - Service Tax

Waiver of pre deposit - Renting of Immovable Property - Held that - There is no dispute regarding liability to service tax on the monthly rental income received except on the issue of admissibility of SSI benefit with regard thereto. However, if the income received from 30 year-lease of property is considered to be taxable, the question of eligibility for the SSI benefit would not arise. We find that the appellants did not own the piece of land on which the commercial building was constructed in-as-much-as it was only leased to them for 30 years by Municipal Corporation, Raipur and therefore the commercial building which they constructed thereon could not have been sold by them because they cannot sell what they do not own. - having regard to the appellants' plea that the advances received had been subsequently adjusted in the rental/lease income shown on which service tax has been demanded and that they should be extended the cum-tax benefit, we order pre-deposit of ₹ 75 lakhs within 8 weeks - Partial stay granted.

Summary

Issues:
1. Whether the income from a 30-year lease of property falls under the category of "Renting of Immovable Property" service for service tax liability.
2. Whether the appellants were eligible for the "SSI" benefit on the monthly rental income.
3. Whether the demand for service tax on advances received in addition to rental/lease income amounted to double taxation.

Analysis:
1. The case involved a dispute regarding the service tax liability on the income derived from a 30-year lease of property under the "Renting of Immovable Property" service. The appellants argued that since they transferred their rights for 30 years to the lessee on a 30-year lease, it constituted a sale and not a rental service. However, the tribunal noted that the appellants did not own the land but had leased it for 30 years, making the income derived from leasing the property taxable under the definition of "Renting of Immovable Property" service. The tribunal distinguished the case from precedents cited by the appellants and held that the income from the lease fell within the taxable category.

2. The tribunal addressed the issue of eligibility for the "SSI" benefit on the monthly rental income. It was observed that if the income from the 30-year lease was considered taxable, the question of eligibility for the benefit would not arise. The tribunal emphasized that the appellants did not own the property but had leased it, making the income subject to service tax. Therefore, the tribunal concluded that the appellants were not eligible for the "SSI" benefit on the rental income.

3. The tribunal also considered the demand for service tax on advances received in addition to the rental/lease income, which the appellants argued amounted to double taxation. The appellants claimed that the advances received were adjusted towards the rental/lease income on which service tax had already been demanded. The tribunal acknowledged the plea and ordered a pre-deposit of a specified amount, taking into account the appellants' argument regarding the advances received and the cum-tax benefit. The tribunal stayed the recovery of the remaining adjudicated liabilities pending compliance with the pre-deposit order.

In conclusion, the tribunal upheld the service tax liability on the income from the 30-year lease of property under the "Renting of Immovable Property" service, denied the "SSI" benefit on the rental income, and addressed the issue of double taxation on advances received by ordering a pre-deposit and stay on recovery pending compliance.