2019 (2) TMI 680 - AT - Service Tax

Valuation - renting of immovable property - case of appellant is that the authorities have not taken into consideration the property tax paid by the appellant while arriving at the total taxable value - Held that - Indeed, if taxes are paid by the appellant, the same has to be considered while arriving at the total taxable value - They have raised contention about the advance deposit received from tenants. The appellant has submitted that they are willing to produce necessary documents - it is proper to remand the matter to the adjudicating authority for requantifying the tax liability after giving the appellant the benefit of the property tax paid by them as well as the rent received in advance from tenants if any - matter on remand. Penalty - Held that - Undisputedly, during the relevant period, the issue whether Renting of Immovable Property Service is subject to levy of service tax was highly contentious. There were litigations pending before various High Courts - Being an interpretational issue, it can be said that the appellant has put forward reasonable cause for invoking section 80 of the Finance Act - penalty set aside. Appeal allowed in part and part matter on remand.

Summary

Issues Involved:
Applicability of service tax on renting of immovable property, quantification of tax liability, consideration of property tax paid, waiver of penalties under section 80 of Finance Act.

Analysis:

Issue 1: Applicability of service tax on renting of immovable property
The appellants were engaged in letting out their property for commercial purposes and did not pay appropriate service tax on the rent received from properties in Delhi and Mumbai. The original authority confirmed the demand of service tax along with interest and penalties under the Finance Act, 1994. The appellant contended that they were initially under a bonafide belief that the services were not subject to service tax. They challenged the amendment seeking to impose service tax on leasing of immovable property. The appellant had made a predeposit of 50% of the taxes as per the High Court's directions. The dispute remained about the quantification of the demand, with the appellant arguing that property tax paid and rent received in advance from tenants should be considered to reduce the tax liability.

Issue 2: Quantification of tax liability
The appellant argued that the entire amount paid by them had not been considered in the demand raised by the notice. They claimed that the property tax paid and rent received in advance from tenants had not been deducted to ascertain the tax liability accurately. The appellant requested a remand to the adjudicating authority for a proper consideration of these aspects to determine the correct tax liability.

Issue 3: Consideration of property tax paid
The appellant contended that the authorities did not consider the property tax paid by them while arriving at the total taxable value. They argued that if taxes were paid, it should be factored into the total taxable value. The Tribunal agreed with this contention and remanded the matter to the adjudicating authority to requantify the tax liability after giving the appellant the benefit of the property tax paid.

Issue 4: Waiver of penalties under section 80 of Finance Act
The appellant pleaded for a waiver of penalties, citing the contentious nature of the issue during the relevant period. They highlighted litigations pending before various High Courts and amendments providing for waiver of penalties if the tax demand on renting of immovable property was paid within a prescribed time. The Tribunal agreed that there was confusion regarding the levy of service tax on renting of immovable property and set aside the penalties entirely, invoking section 80 of the Finance Act.

In conclusion, the Tribunal modified the impugned order by setting aside the penalties entirely and remanding the issue of service tax demand to the adjudicating authority for proper quantification considering the property tax paid and rent received in advance. The appeals were partly allowed and partly remanded with consequential relief.