2016 (12) TMI 735 - AT - Service Tax

Valuation - renting of immovable property service - the appellants were providing various common additional services and collected certain amounts from the tenants - whether the appellant was required to include the amount collected for such services under the head of Renting of Immovable Property Services ? - Held that - on perusal of rent agreement, it is found that ₹ 9,500/- per month is paid for the purpose of renting of the premises. The other amounts are paid a reimbursement for common additional services. These services can no stretch of imagination of renting of immovable property services and therefore, demand under the said head cannot be confirmed. The impugned order is set aside - appeal allowed - decided in favor of appellant-assessee.

Summary

Issues:
Interpretation of services provided under renting of immovable property for taxation purposes.

Analysis:
The case involved an appellant, M/s. Mandhana Exports, holding service tax registration for renting out their factory premises to twenty-four different parties. The appellant charged a rent of ?9,500 per month from each lessee and also provided additional services like security guard, emergency electricity generator, common sanitary block, repairs & maintenance of the building, and vehicle expenses. A show-cause notice was issued to include the amounts collected for these additional services under the category of "Renting of Immovable Property Services," which was confirmed by the lower authorities.

The appellant argued that the additional services provided should not be considered part of renting of immovable property service, as they were separate services and not included in the terms of the lease agreement. On the other hand, the respondent contended that since the amounts were collected under a common agreement, they should be treated as part of the renting of immovable property services.

Upon examining the submissions, the Tribunal noted that there was a single agreement in place. The monthly rent of ?9,500 was explicitly for the renting of the premises, while the additional amounts were charged for specific services provided separately. The Tribunal concluded that the additional services listed were not related to renting of immovable property and, therefore, the demand under that category could not be confirmed. As a result, the impugned order was set aside, and the appeal was allowed in favor of the appellant.

In the judgment pronounced on 22-11-2016 by the Tribunal, it was clarified that the amounts collected for services beyond the renting of the premises were not subject to taxation under the category of renting of immovable property services, emphasizing the distinction between rent and additional service charges in the agreement.