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2019 (11) TMI 249 - AT - Service TaxRenting of Immovable property - SCN was issued to the Appellant by the Department alleging that the amounts received by them in the aforesaid joint venture is a consideration for renting of immovable property service rendered to MPWLC - Charge of service tax. HELD THAT - Section 65(105)(zzzz)of the Finance Act, 1994 provides for charging service tax on any service provided or to be provided to any person, by any other person by renting of immovable property or any other service in relation to such renting for use in the course of or for furtherance of business or commerce - For a tax to be levied under this heading, there must be a service provider and a service recipient and the service which is provided must be renting of immovable property and such renting must be for use in the course of furtherance of business or commerce. No service tax can be levied on renting of immovable property in the present case. Also, no evidence that there was any renting of the warehouses by the Appellant to MPWLC was for use in the course of or furtherance of business or commerce. Thus, there is no renting, no service provider and no service recipient in their arrangement and hence is not covered by the charging section. There is no hesitation in holding the impugned order unsustainable, with respect to the demand of service tax, interest as well as imposition of penalties and needs to be set aside - appeal allowed - decided in favor of appellant.
Issues involved:
1. Whether the amounts received in a joint venture agreement for providing warehouses constitute "renting of immovable property" service under Section 65(105)(zzzz) of the Finance Act, 1994? 2. Whether the demand of service tax, interest, and penalties imposed by the Principal Commissioner is justified? 3. Whether the nature of the transaction between the parties is that of a joint venture or a service provider-service recipient relationship? Analysis: Issue 1: The Appellant and M/s M.P. Warehousing and Logistics Corporation (MPWLC) entered into a joint venture agreement to provide warehouses in Madhya Pradesh. The Department alleged that the amounts received by the Appellant in this joint venture constitute "renting of immovable property" service under Section 65(105)(zzzz) of the Finance Act, 1994. The Appellant argued that the arrangement was a joint venture with profit-sharing and not a service provider-service recipient relationship. The Tribunal found that in a joint venture, there is no service provider or service recipient, only partners in business. It concluded that no service tax can be levied on renting of immovable property in this case as there was no evidence that the warehouses were rented for business or commerce purposes. Issue 2: The Principal Commissioner confirmed the demand of service tax, interest, and penalties on the Appellant. The Appellant contended that the demand was unjustified as the nature of the transaction was that of a joint venture. The Tribunal noted that the Department's argument regarding TDS deduction by MPWLC does not change the joint venture nature of the transaction. Additionally, the Tribunal referred to previous orders in the Appellant's favor on similar issues. Consequently, the Tribunal held the impugned order unsustainable and set it aside, allowing the Appeal with consequential relief. Issue 3: The Appellant argued that the joint venture agreement with MPWLC did not constitute renting of immovable property for business or commerce purposes. The Departmental Representative reiterated the findings of the original authority, emphasizing the TDS deduction as crucial in determining the nature of the transaction. The Tribunal found that the joint venture arrangement did not fall under the charging section for service tax on renting of immovable property. It also considered the past decisions in the Appellant's favor on similar issues, further supporting the joint venture nature of the transaction. In conclusion, the Tribunal set aside the impugned order, ruling in favor of the Appellant and holding that no service tax was applicable on the amounts received in the joint venture agreement with MPWLC.
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