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2019 (12) TMI 645 - AT - Service TaxNature of activity - service or sale - lease of 999 years is equivalent to sale or not - renting of immovable property service or not - conducting agreement in which the appellant, M/s Starcity Entertainment Pvt Ltd, executed with the conductor , M/s Movie Time, for granting conducting rights which also included an option to purchase, or lease, the theatre belonging to them - It is the contention of Learned Counsel that the transaction is nothing but a sale and hence beyond the pale of taxability under Finance Act, 1994. HELD THAT - The appellant herein had initially contracted with M/s Movie Time for the use of the theatre for conducting and, on exercise of option, purportedly, of purchase, transferred possession itself against annual lease rental and one-time premium components. This would, prima facie, bring the contractual agreement within the scope of the rentals - Furthermore, as pointed out in the impugned order, the entire property, and its benefits thereof, had not been alienated by the appellant; the retention of right to built-up space above and around the contracted property was incorporated in the agreement. It could, therefore, by no means be determined to be a sale agreement as commonly understood. Accordingly, the consideration is for the limited use of the property which squarely fall within the scope of section 65(105)(zzzz) of Finance Act, 1994. The decision in HOBBS BREWERS INDIA PVT. LTD. VERSUS UNION OF INDIA 2016 (4) TMI 1173 - TRIPURA HIGH COURT has made it abundantly clear that the claim of the petitioner therein for restricting the taxability to rent, and not the premium, was dismissed thereby laying down the principle that premium is nothing but an advance rent , and, therefore, taxable which was adopted by the Tribunal in RIICO LTD., M/S RAJASTHAN STATE INDUSTRIAL DEVELOPMENT INVESTMENT CORPN. LTD. VERSUS CCE, JAIPUR-II 2017 (5) TMI 673 - CESTAT NEW DELHI to hold that, though premium was also taxable, an exception was carved out for lease tenor exceeding 30 years arising from the specific provision incorporated through section 104 in Finance Act, 1994 - Admittedly, this provision does not apply to the present transaction. In the established fact of absence of complete and entire ownership of the property and, in the light of the decision in re Hobbs Brewers India Pvt Ltd and in re RIICO Ltd, premium being rent , except in the peculiar circumstances of transactions with entities of state governments, the only issue that remains for resolution is the extent to which the decision in COMMISSIONER OF SERVICE TAX, NOIDA VERSUS M/S GREATER NOIDA DEVELOPMENT AUTHORITY, GREATER NOIDA 2015 (10) TMI 296 - ALLAHABAD HIGH COURT favours the appellant. In re Greater Noida Industrial Development Authority there is no lack of clarity in the assertion of the Tribunal that Since the levy of Service Tax is on renting of immovable property, not on transfer of interest in property from lesser to lessee, Service Tax would be chargeable only on the rent whether it is charged periodically or at a time in advance. It appears that the principle of taxability that found favour was discarded in circumstances peculiar to that case and, the absence of challenge in such circumstances, is not to be presumed as acceptance of a contrary proposition - there are thus no contradiction between the two decisions of the Tribunal warranting a different conclusion. Thus, the lump sum payment becomes liable to tax under Finance Act, 1994 in addition to the periodic payments - appeal dismissed.
Issues Involved:
1. Taxability under section 65(105)(zzzz) of Finance Act, 1994. 2. Nature of the transaction between the appellant and M/s Movie Time. 3. Whether the lump sum payment (premium) is considered rent and thus taxable. 4. Applicability of judicial precedents to the present case. Issue-wise Analysis: 1. Taxability under section 65(105)(zzzz) of Finance Act, 1994: The primary issue concerns the taxability of the transaction under section 65(105)(zzzz) of the Finance Act, 1994. The appellant argued that the transaction was a sale, not a lease, and thus not taxable under the said section. However, the Tribunal concluded that the transaction was not a sale but a lease, making it taxable under the specified section. The Tribunal noted that the appellant retained certain rights, such as the right to built-up space, indicating that the transaction was not a complete transfer of ownership. 2. Nature of the transaction between the appellant and M/s Movie Time: The Tribunal examined the nature of the transaction, which involved an initial agreement for 'conducting' the theatre, followed by an option to purchase. The appellant received a lump sum payment and periodic lease rentals. The Tribunal found that the agreement did not constitute a sale but a lease, as the appellant retained certain rights and the transaction included both a lump sum payment and periodic rentals, fitting the definition of a lease under section 65(105)(zzzz). 3. Whether the lump sum payment (premium) is considered rent and thus taxable: The Tribunal addressed whether the lump sum payment (premium) should be considered rent and thus taxable. It relied on judicial precedents, such as the decision in re Hobbs Brewers India Pvt Ltd, which held that premium is akin to an advance rent and therefore taxable. The Tribunal also referred to the decision in re RIICO Ltd, which clarified that premium is taxable except in specific circumstances involving state government entities. The Tribunal concluded that the lump sum payment in the present case was taxable. 4. Applicability of judicial precedents to the present case: The Tribunal considered various judicial precedents cited by both parties. It distinguished the present case from those involving state government entities, noting that the decisions in re Greater Noida Industrial Development Authority and re RIICO Ltd pertained to different contexts. The Tribunal emphasized that the principle established in re Hobbs Brewers India Pvt Ltd, which treats premium as taxable rent, was applicable to the present case. The Tribunal also noted that the decision in re Greater Noida Industrial Development Authority did not contradict this principle, as it addressed specific circumstances of that case. Conclusion: The Tribunal concluded that the lump sum payment (premium) and periodic lease rentals were both taxable under section 65(105)(zzzz) of the Finance Act, 1994. The appeal was dismissed, and the lump sum payment was deemed liable to tax in addition to the periodic payments. The Tribunal found no merit in the appellant's arguments and upheld the tax demand.
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