2018 (2) TMI 842 - AT - Service Tax

Renting of immovable property service - Revenue held a view that license agreement is for renting of immovable property service and service tax was liable to be paid w.e.f. 1.6.2007 - Held that - the whole consideration is with reference to leasing out of commercial property and is rightly to be taxed as renting of immovable property w.e.f. 1.6.2007. The appellant pleaded that they have paid service tax on such liability - a portion of the consideration for such renting cannot be taxed prior to 1.6.2007 under a heading of maintenance or repair service. Service tax liability on IPR service - Held that - The said transfer admittedly happened through a MOU dated 27.03.2000. The considerations were received periodically does not make the service as a continuing service - the taxable event happened prior to the tax entry was introduced in the law, no tax liability can be confirmed against the appellant. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Taxability of license agreements for renting of immovable property service and maintenance services.
2. Service tax liability on Intellectual Property Right (IPR) service.

Analysis:
1. The appellants had entered into agreements for leasing commercial space in their building, accompanied by separate agreements for maintenance and user charges. The Revenue contended that the license agreement was for renting immovable property service, and service tax was due from 1.6.2007. Additionally, maintenance agreements were considered liable for service tax under maintenance or repair service for the period 16.06.2005 to 31.05.2007. A demand for Intellectual Property Right Service tax was raised for the usage of a brand name by another company. The lower authorities upheld the tax liabilities and penalties.

2. The appellant argued that the agreements were primarily for leasing commercial space, with services like managing common facilities included. They began paying service tax on the full value from 1.6.2007 when tax on renting immovable property service was introduced. The appellant contended that a part of the consideration could not be taxed under maintenance or repair service before this date. Regarding IPR service tax liability, the appellant highlighted that the brand name transfer occurred before the tax levy introduction, making any consideration post that event not subject to service tax.

3. The Appellate Tribunal analyzed the agreements and found that the consideration for maintenance of common facilities was integral to the leasing service provided by the appellants. The Tribunal concluded that the entire consideration was rightly taxed as renting of immovable property service from 1.6.2007, and a portion could not be taxed earlier under maintenance or repair service. On the issue of IPR service tax liability, the Tribunal noted that the transfer of IPR rights predated the tax entry, thereby absolving the appellant from any tax liability.

4. Citing precedents and legal principles, the Tribunal held that the impugned order was unsustainable and set it aside, allowing the appeals. The decision was based on the understanding that the agreements primarily pertained to leasing commercial property, and any tax liabilities were correctly addressed in line with the applicable tax provisions and timelines.

Conclusion:
The judgment by the Appellate Tribunal CESTAT NEW DELHI addressed the taxability of license agreements for renting immovable property service and maintenance services, along with the service tax liability on Intellectual Property Right (IPR) service. The Tribunal ruled in favor of the appellant, emphasizing that the consideration for common facilities maintenance was part of the leasing service and should be taxed as such. Additionally, the Tribunal absolved the appellant from IPR service tax liability, as the transfer of rights occurred before the tax levy introduction.