2018 (7) TMI 1674 - AT - Service Tax

Renting of Immovable Property Services - rent received on leasing the fit outs in the premises - Whether the appellants are liable to pay service tax on the rent received for leasing the fit outs? Held that - Undisputedly, the appellants have entered into two different agreements for leasing the premises and leasing the fit outs. The fit outs include air conditioners, CCTV, fire alarms, etc. Appellants are discharging VAT on the rent received for leasing the fit outs. They have been discharging VAT even before the services of renting of immovable property became taxable. The Tribunal in the case of Ascendas IT Park (Chennai) Ltd. 2018 (1) TMI 827 - CESTAT CHENNAI has considered the very same issue and held that VAT and service tax being mutually exclusive, service tax cannot be demanded on the very same consideration received for renting of movable properties. The demand cannot sustain and requires to be set aside - appeal allowed - decided in favor of appellant.

Summary

Issues: Liability to pay service tax on rent received for leasing fit outs in the premises.

Analysis:
1. The appellants were engaged in providing Renting of Immovable Property Services. The Department alleged non-payment of service tax on fit outs leased to tenants, leading to a Show Cause Notice for demanding service tax, interest, and penalties. The Original Authority confirmed the demand, prompting the appellants to appeal before the Tribunal.

2.1 The appellant argued having separate agreements for renting premises and fit outs, with service tax already paid on premises rent. The dispute arose over service tax on fit outs rent, contending it was akin to transfer of right to use goods, with sales tax/VAT already discharged.

2.2 The appellant maintained that leasing fit outs was distinct from renting immovable property, having paid VAT on fit outs even before service tax was levied. Citing legal precedents, the appellant argued for the exclusivity of service tax and VAT.

2.3 The Department argued that services provided alongside renting immovable property are taxable, asserting fit outs are part of premises renting. They contended that effective control over leased fit outs remained with the lessor, justifying service tax on fit outs rent.

3. The Tribunal considered the issue of liability for service tax on fit outs rent. Noting separate agreements for premises and fit outs, the Tribunal referenced legal decisions establishing the mutual exclusivity of service tax and VAT. Relying on precedents, the Tribunal concluded that the demand for service tax on fit outs rent was unsustainable, setting aside the impugned orders.

4. Additionally, the Department filed Miscellaneous Applications for changing the respondent's name post-G.S.T. introduction. The Tribunal allowed the applications, directing the Registry to make necessary amendments.

In conclusion, the Tribunal ruled in favor of the appellants, setting aside the demand for service tax on rent received for leasing fit outs. The decision was based on the distinct nature of agreements for premises and fit outs, supported by legal precedents establishing the mutual exclusivity of service tax and VAT. The Tribunal also granted the Department's requested changes in the respondent's name post-G.S.T. implementation.