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TMI Blog2019 (12) TMI 645X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsideration of ₹ 1,25,00,000, adjusted from the security deposit, and on payment of an additional ₹ 50,00,000. The demand of ₹ 21,63,012, as provider of 'renting of immovable property service' between 1st July 2007 and 31st March 2009, was worked out on lease premium received and the lease receipts on which tax liability had not been discharged and on the finding that the transaction layered under misleading description for that very purpose. 2. With the conclusion that '20. It can be seen that the Noticee had received ₹ 175 lakhs on account of signing of a 999 years lease with M/s Movie Time. Whether any amount received on account of lease of 999 years would still be taxable under Renting of immovable property service would depend on whether leasing for such amount of years would still remain a lease and not be considered as a sale for all practical purposes as contended by the Noticee. It is seen that though the judicial pronouncements are yet to be made as on date on this issue in service tax, case laws do exist on the income tax and sales tax side. Case law given by the Noticee that receipt of lease premium for 999 years is a capital income and not r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... either premium or rent or both. The consideration which is paid periodically is called rent. As regards premium, the Apex Court in the case of Commissioner of Income Tax, Assam and Manipur v. Panbari Tea Co. Ltd. reported in (1965) 3 SCR 811 has made a distinction between premium and rent observing that when the interest of the lessor is parted with for a price, the price paid is premium or salami, but the periodical payments for continuous enjoyment are in the nature of rent, the former is a Capital Income and the latter is the revenue receipt. Thus, the premium is the price paid for obtaining the lease of an immovable property. While rent, on the other hand, is the payment made for use and occupation of the immovable property leased. Since taxing event under Section 65(105)(zzzz) read with Section 65(90a) is renting of immovable property, Service Tax would be leviable only on the element of rent i.e. the payments made for continuous enjoyment under lease which are in the nature of the rent irrespective of whether this rent is collected periodically or in advance in lump sum. Service Tax under Section 65(105)(zzzz) read with Section 65(90a) cannot be charged on the "premium" or 's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 193], (3) R.K. Palshikar (HUF) v. CIT [(1988) 3 SCC 594], (4) Maharaja Chintamani Saran Naty Sah Deo v. CIT (AIR 1961 SC 732), and (5) Associated Hotels of India Ltd. v. R.N. Kapoor (1959 AIR SC 12262) do not lay down anything contrary to what has been recorded by us herein above. 36. We may not enter into the issue as to whether premium paid along with rent fixed should form the total consideration for levy of Service Tax or not as no appeal has been filed by the Department against the order of the Tribunal. But at the same time if the Tribunal has held that only rent charged be considered for computation of Service Tax, it will not mean that the Tribunal has held that a part of the same transaction was taxable and part of it as not taxable. In our opinion, the Tribunal has rightly held that the lease of open land for use as commercial/business purpose, as an taxable event, but what amount is to be taken into consideration for computation of Service Tax has been confined to the periodical rent only. The plea raised to the contrary by the learned counsel for the appellant has therefore, to be rejected.' by Hon'ble High Court of Allahabad in Greater Noida Industrial Development A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asing, licensing or other similar arrangements amounts to providing service and under Section 65(105)(zzzz) it is a taxable service. 5. It is urged on behalf of the petitioner that what is taxable is the rent and not premium. This argument is without any basis whatsoever. What is taxable is the consideration for the transfer. Even if premium is charged that is like charging of one time rent and then rebate is given for the yearly rent to be paid. Premium is also part of the lease money. Therefore, the entire transaction both premium and rent are amenable to Service Tax and Service Tax will have to be paid on the same. 6. Another submission has been made by Mr. Bhattacharji, that this premium includes capital investment. We do not understand what is the meaning of this argument? It is true that the payment of premium will be treated as a capital investment but this does not mean that it is not the consideration for the lease". 16. In view of the legal position as explained above by the Hon'ble Tripura High Court, we find that the appellants are liable to Service Tax on the premium received on leasing of land for the periods of less than 30 years. Xxxx 27. In view of the abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 considered by the Tribunal, and High Courts, in the decisions cited before us. 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. 7. The decision in re Hobbs Brewers India Pvt Ltd has made it abundantly clear that the claim of the petitioner therein for restricting the taxability to rent, and not the premium, was dismissed as '5.…… without any basis whatsoever. What is taxable as the consideration for the transfer. Even if premium is charged that is like charging of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 65(90a) is renting of immovable property, Service Tax would be leviable only on the element of rent i.e. the payments made for continuous enjoyment under lease which are in the nature of the rent irrespective of whether this rent is collected periodically or in advance in lump sum. Service Tax under Section 65(105)(zzzz) read with Section 65(90a) cannot be charged on the "premium" or 'salami' paid by the lessee to the lessor for transfer of interest in the property from the lessor to the lessee as this amount is not for continued enjoyment of the property leased. Since the levy of Service Tax is on renting of immovable property, not on transfer of interest in property from lessor to lessee, Service Tax would be chargeable only on the rent whether it is charged periodically or at a time in advance. In these appeals, in the show cause notice dated 19-3-2012 issued by the Addl. Director, DGCEI, New Delhi, Service Tax has been demanded only on the lease rent and not on the premium amount while in the subsequent show cause notice dated 17-10-2012 issued by the Commissioner of Central Excise and Service Tax, Noida, the amount of premium has also been included in the lease rent f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cally contested the findings of the Tribunal in Greater Noida Industrial Development Authority (supra) as recorded in para 10.1 of the order. He submitted that having recorded that the consideration may be either premium or rent or both, for lease transaction, the Tribunal referred to the decision of Hon'ble Supreme Court in Panbari Tea Company Ltd. - 1965 (3) SCR (811) to distinguish between premium and rent. It was recorded that the premium or salami is towards a price for parting with the interest on land and the periodical payment is in the nature of rent. The former is a capital income and a latter is revenue receipt. The premium is a price paid for obtaining the lease of an immovable property. The learned AR submitted that the treatment of Income-tax Act with reference to various types of incomes has no direct relevance while considering the provisions of Section 67 of the Finance Act, 1994. The provisions of Income-tax Act are having specific scope, purpose and intend, as decided by the legislature. The same cannot be referred to for deciding taxable value with reference to Service Tax which is entirely on a different footing. Section 67 does not provide for such split up of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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