2015 (12) TMI 875 - AT - Service Tax

Waiver of pre deposit - inclusion of reimbursement of expenses in the value - allocation of cost of expenses - renting of immovable property - Held that - Appellant is acting as pure agent. As regards BESCOM, charges actually paid to the BESCOM can be said to be in the nature of pure agent since BESCOM charges are required to be paid by the individual flat/space owners. At this stage, therefore, in the absence of any evidence to show that there were no separate lease agreements for each tenant, at this stage, the claim of the appellant that they acted as pure agent on a prima facie basis has to be accepted. However, as regards the difference of ₹ 95,89,015/-, according to the appellants, this is collected towards generator power by the appellants themselves. This is a facility provided by the leaser to the tenants and there are two ways of collecting the amount. One way would be treating average expenses as part of the rent. The other was would be recovering the expenses on the basis of a calculation. Other than submitting that it can be shown by them that the actual expenses incurred on power generator, depreciation, etc., is less than what has been recovered, no evidence has been produced. This expenditure cannot be considered as expenditure incurred on behalf of the tenant and paid to someone else and therefore, appellant has acted as a pure agent cannot also be a view. In such a situation, it can be said that appellant has not made out a prima facie case in respect of the amount collected on this account of ₹ 95,89,015. Therefore, appellant has to be put to some terms to pay tax on this amount. - Partial stay granted.

Summary

Issues:
1. Liability of Service Tax on power charges collected by the appellant.
2. Whether the appellant acted as a pure agent in collecting power charges.
3. Treatment of the difference in amount collected and paid to BESCOM for power charges.

Analysis:
1. The appellant, a partnership firm renting immovable property, was paying Service Tax on rents and maintenance charges. However, a demand for Service Tax of &8377; 2,47,18,037/- was imposed for the period 2006-07 to 2010-11 due to alleged non-payment on power charges collected. The appellant argued that power charges were reimbursements, not rent, and hence not taxable.

2. The appellant claimed the difference in amount collected and paid to BESCOM was for backup power generation expenses. They contended this was a recovery of actual expenses for providing backup power and maintenance of the generator, which could be verified. The lease agreement allowed power charge collection based on actual consumption, indicating reimbursement of expenses.

3. The Tribunal noted that under the Finance Act, only actual expenses incurred and paid on behalf of the service receiver could be reduced. While BESCOM charges were considered as paid to a pure agent, the &8377; 95,89,015/- difference was for generator power, not expenses on behalf of tenants. Lack of evidence on actual expenses incurred meant the appellant failed to establish acting as a pure agent for this amount. Thus, they were directed to deposit &8377; 15 lakhs within eight weeks, with the balance dues waived pending appeal.

In conclusion, the judgment clarified the tax liability on power charges, the concept of acting as a pure agent, and the treatment of specific expenses in the context of Service Tax obligations for a partnership firm renting immovable property.