2012 (6) TMI 490 - AT - Service Tax

Service of renting of immovable property - demand of service tax - Held that - Considering the definition of immovable property, the same does not include building used solely for residential purposes and building used for the purpose of accommodation including hotels, hostels, boarding houses, holidays accommodation, tents, camping facility etc.- in favour of assessee.

Summary

Issues:
Service tax liability for renting immovable property for commercial use.

Analysis:
The judgment revolves around the confirmation of service tax liability amounting to Rs. 19,50,612 against the appellant for renting immovable property to a company for commercial purposes. The appellant argued that the definition of immovable property excludes buildings used solely for residential purposes or for accommodation like hotels. However, the Commissioner (Appeals) noted that the appellant leased the land along with the building, swimming pool, restaurant, bar, and parking facilities to run a commercial hotel business. The Commissioner held that the exemption under the relevant section of the Finance Act, 1994, applies to hotels and hostels providing rooms on rent, not to immovable property rented out for commercial activities like running a hotel. The Commissioner's decision was based on the commercial nature of the activity conducted on the leased property.

The Tribunal disagreed with the Commissioner's reasoning and highlighted the specific exclusion clause in the explanation to the relevant section. The explanation explicitly states that immovable property does not include buildings used solely for residential purposes or for accommodation purposes like hotels, hostels, boarding houses, holiday accommodations, tents, and camping facilities. Therefore, the Tribunal found that the appellant had a strong prima facie case in their favor, indicating that the stay petition should be unconditionally allowed. The judgment clarifies the distinction between properties used for residential purposes and those used for commercial activities like hotels, emphasizing the scope of the exemption under the relevant tax provisions.

In conclusion, the Tribunal's decision favored the appellant by recognizing the applicability of the exemption clause to properties used for commercial activities like running a hotel. The judgment provides clarity on the interpretation of immovable property in the context of service tax liability, emphasizing the specific exclusions mentioned in the relevant legislation.