9911796707
TMI BlogNo Service tax on notional interest on security deposit for rented premisesX X X X Extracts X X X X X X X X Extracts X X X X ..... No Service tax on notional interest on security deposit for rented premises X X X X Extracts X X X X X X X X Extracts X X X X ..... paid on notional interest on security deposit taken for premises rented out on lease? Facts & Background: M/s Magarpatta Township Development & Construction Co. Ltd. ("the Appellant") is a service provider engaged in renting of immovable property of commercial construction undertaken by them. The Appellant discharged service tax liability on the rent received from the lessees. Further, the Appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant has taken security deposit from the lessees for the damages, if any, caused to the furniture and fittings supplied along with the premises or any damage done to the properties. The department contended that notional interest on the security deposit is a consideration for the renting of the immovable property and thus liable to service tax. Thus service tax of Rs.3,26,12,102/ was demanded for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the period June 1, 2007 to January 31, 2011 along with interest and penalty, which was confirmed by the by the Commissioner of Central Excise & Service Tax, Pune along with interest thereon and equivalent amount of penalty was also imposed on the Appellant. Hence, the Appellant filled appeal before the CESTAT. Held: The Hon'ble CESTAT granted unconditional waiver from pre-deposit of dues adjud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged against the Appellant and stay recovery thereof during pendency of the appeal. The Hon'ble CESTAT observed as under: * Taking security deposit for the premises rented out on lease basis is common throughout the country. The amount of security deposit taken varies from place to place and also depends on the property, whether it is for commercial or residential purpose. * No evidence availab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le on record led by the revenue to show that the notional interest on the interest free security deposit has influenced the consideration received for renting and it is only a presumption on the part of the revenue. * The Hon'ble CESTAT relied on the decision of Apex Court decision in the case of CCE, Mumbai-III Vs. ISPL Industries Ltd. [ 2003 (4) TMI 99 - SUPREME COURT OF INDIA ] wherein it ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been held that notional interest on the advances taken by the assessee, from the buyers cannot be added to the assessable value of the goods cleared, unless there is evidence to show that the interest free deposit taken has influenced the price. In this context the Appellant contended that security deposit has no nexus with the area of the property rented out. It is charged as six months' rent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and therefore, it cannot be said that the notional interest has influenced the consideration received for the services rendered. Therefore, relying on the judgement of ISPL Industries Ltd, the Hon'ble Mumbai Tribunal rejected the contention of the authorities and granted stay of recovery during pendency of the appeal. Hope the information will assist you in your Professional endeavours. In case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of any query/ information, please do not hesitate to write back to us. Thanks & Best Regards Bimal Jain FCA, FCS, LLB, B.Com (Hons) Mobile: +91 9810604563 E-mail: [email protected] Disclaimer: The contents of this document are solely for informational purpose. It does not constitute professional advice or recommendation of firm. Neither the authors nor firm and its affiliates accepts a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny liabilities for any loss or damage of any kind arising out of any information in this document nor for any actions taken in reliance thereon. Readers are advised to consult the professional for understanding applicability of this newsletter in the respective scenarios. While due care has been taken in preparing this document, the existence of mistakes and omissions herein is not ruled out. No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part of this document should be distributed or copied (except for personal, non-commercial use) without our written permission. X X X X Extracts X X X X X X X X Extracts X X X X
|
