2015 (12) TMI 880 - AT - Service Tax

Demand of service tax - Renting of immovable property - Claim of the appellant that a portion of the premises was rented out for running the hotel to M/s. Savi Associates has not been considered on the ground that the definition of renting of immovable property service covers the renting of premises for commercial purposes without considering the part of the definition which provides for exclusions for certain categories. On going through the definition - Held that - I find that the definition excludes buildings used for the purpose of accommodation, including hotels. It has not been disputed by the lower authorities that the portion of the premises rented out to M/s. Savi Associates has been used for running a hotel. Therefore the rent collected from M/s. Savi Associates has to be excluded for the purpose of collection of service tax. - If the amount already paid covers the amount of service tax payable with interest, it can be said that appellants have fulfilled their obligation under the law in its entirety. This observation is made taking into account the provisions of Sections 80(1) and 80(2) of Finance Act, 1994. Since I consider that appellants had reasonable cause for non-payment of tax during the relevant time, therefore penalty is not imposable. Even otherwise provisions of Section 80(2) would also apply to the appellant. - Matter remanded back - Decided in favour of assessee.

Summary

Issues: Liability to pay service tax on renting out immovable property for commercial purposes, applicability of penalty under Section 80 of Finance Act, 1994.

In this judgment by the Appellate Tribunal CESTAT BANGALORE, the appellant had rented out their property to various tenants, including one using a portion for running a hotel. The authorities initiated proceedings to demand service tax totaling to &8377; 7,11,232/- with interest for the period from June 2007 to January 2010, and imposed a penalty. The appellant contended that the portion rented out for the hotel should be excluded from service tax liability, and they had already paid an amount exceeding the tax due, which should cover the entire liability if cum-tax benefit is considered. They also argued that due to conflicting views on liability during the relevant period, there was a reasonable cause for non-payment of tax, invoking Section 80 of the Finance Act, 1994.

Upon review, the Tribunal found that the definition of renting of immovable property service excludes buildings used for accommodation, such as hotels. Since the portion rented to the hotel was excluded, the rent collected from that tenant should not be subject to service tax. The Tribunal agreed that the appellant was entitled to the cum-tax benefit, and if the amount already paid covered the tax due with interest, the appellant had fulfilled their obligation under the law. Considering the reasonable cause for non-payment of tax during the relevant period, the Tribunal held that no penalty was imposable, even under Section 80(2) of the Finance Act, 1994.

Consequently, the impugned order was set aside, and the matter was remanded to the original adjudication authority for quantification of the demand and verification of the amount paid by the appellant. The appeals were allowed by way of remand, ensuring a fair assessment of the tax liability and payments made by the appellant.