2019 (3) TMI 1431 - AT - Service Tax

Renting of Immovable Property Service - notional interest accrued on advance amount received - Held that - The issue decided in favor of appellant in the case of M/S PHOENIX INTERNATIONAL LTD. VERSUS THE COMMISSIONER, CENTRAL EXCISE & SERVICE TAX, NOIDA 2018 (12) TMI 256 - CESTAT ALLAHABAD , where it was held that there was no reason to add notional interest in the monthly rent for the purpose of assessment of service tax - appeal allowed - decided in favor of appellant.

Summary

Issues:
Whether the appellants are liable to pay service tax on the notional interest accrued on an advance amount received for providing Renting of Immovable Property Services.

Analysis:

Issue 1: Liability for Service Tax on Notional Interest
The appellants received an advance amount for renting out their premises and deposited it in their current account. The Department contended that service tax was applicable on the notional interest accrued on this advance. A Show Cause Notice was issued, demanding service tax along with penalties. The Original Authority and the Commissioner (Appeals) upheld the demand. The appellant argued that interest on such deposits should not be subject to service tax, citing relevant case laws. After considering the submissions, the Tribunal found that the issue was whether the appellants were liable to pay service tax on the notional interest on the advance deposit for Renting of Immovable Property Services.

Case Laws and Decision
The appellant relied on cases such as M/s. Phoenix International Ltd. Vs. The Commissioner, CESTAT Allahabad, M/s. Karad Nagar Parishad Vs. Commissioner of C.Ex. & S.T., and M/s. Murli Realtors Pvt. Ltd. Vs. Commissioner of Central Excise, Pune-III. The Tribunal noted that the issue was covered by the decisions cited by the appellant's counsel. Consequently, the Tribunal held that the demand for service tax on notional interest could not be sustained and set it aside. The appeal was allowed with any consequential benefits as per law.

This judgment clarifies the applicability of service tax on notional interest accrued on advance amounts received for Renting of Immovable Property Services. The Tribunal's decision was based on the interpretation of relevant laws and previous case laws, highlighting the importance of legal precedents in tax matters.