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TMI Blog2023 (6) TMI 414X X X X Extracts X X X X X X X X Extracts X X X X ..... ation is for the service of providing renting of immovable property - the rent is paid all along when the transfer of right in the immovable property is active and alive. Similar arrangement of licence granted to operate and run a Hotel was considered by the Tribunal in the case of GRAND ROYALE ENTERPRISES LTD. VERSUS COMMISSIONER OF SERVICE TAX-I CHENNAI [ 2018 (10) TMI 656 - CESTAT CHENNAI ]. The Tribunal had set aside the demand and relied upon the decisions of the Tribunal in the case of AMBIENCE CONSTRUCTIONS INDIA LTD. VERSUS THE COMMISSIONER OF SERVICE TAX HYDERABAD [ 2012 (11) TMI 653 - CESTAT BANGALORE ] and M/S JAI MAHAL HOTELS PVT LTD VERSUS COMMISSIONER OF CENTRAL EXCISE [ 2014 (7) TMI 540 - CESTAT NEW DELHI] - The above decision of the Tribunal in the case of Grand Royale Enterprises (supra) was affirmed by the Hon ble Supreme Court in COMMISSIONER OF SERVICE TAX 1 CHENNAI VERSUS GRAND ROYALE ENTERPRISES LTD. [ 2022 (9) TMI 273 - SC ORDER ]. After analysing the facts, evidence and applying the decision in the case of Grand Royale Enterprises as affirmed by the Hon ble Apex Court, it is opined that the demands cannot sustain - Appeal allowed. - Serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such amounts received by them. Show Cause Notices were issued for the period June 2010 to February 2011 and March 2011 to June 2011 to the appellant proposing to demand service tax along with interest and for imposing penalties. After due process of law the original authority confirmed the demand along with interest and imposed penalties. On appeal the Commissioner (Appeals) upheld the same. Aggrieved by such order, the appellant is now before the Tribunal. 3. The learned Counsel Shri Joseph Prabhakar appeared and argued for the appellant. It is submitted by the learned counsel that, as per the License agreement dated 21.06.2010, the appellant had granted license to GRT to operate and run the Hotel. Though the appellant was earlier running the hotel and registered with the Department for providing Outdoor Catering Services and Mandap Keeper Services , after executing the said agreement with GRT, the appellant exited the business of running the hotel. Consequently the appellant had surrendered the service tax registration on 09.07.2010. 4. GRT was operating and running the Hotel business and also obtained service tax registration on 24.06.2010. GRT, as part of running the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urse or furtherance of business or commerce and partly for residential or any other purposes shall be deemed to be immovable property for use in the course or furtherance of business or commerce 7. It is urged by the learned counsel that as per the plain reading of the above definition, it can be seen that the term immovable property excludes Hotels . It is very much clear that the transaction of grant of License to operate and run the hotel given to GRT is outside the purview of the taxable service. 8. The adjudicating authority has relied upon Explanation 2 of the above definition. It is discussed in para 8 of the Order-in-Original that the premises is used not only as Hotel and is also used for Mandap Keeper Services. The learned counsel asserted that as per the definition buildings used solely for residential purposes, and buildings used for the purposes of accommodation including Hotels is excluded. The Hotel run by GRT provides facility of room accommodation. Along with room facility a Hotel may be providing many other services/facilities like restaurant, gym, mandap keeper services etc., which are ancillary to the service of providing room facility. Such services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liable to pay service tax under the category of Renting of Immovable Property Services for the amounts received from GRT. 13. The definition of Renting of Immovable Property Services has already been noticed in para 1 above. So also the relevant portion of the agreement is reproduced in para 1. It is the case of the appellant that they have entered into an agreement with GRT whereby GRT is given the permission to run the hotel. The question is as per the transfer of right in the agreement, whether there is an activity which is covered by the definition of Renting of Immovable Property Service . The learned AR has emphasized that the definition is applicable to all arrangements of transfer of right of immovable property similar to the nature of renting, letting, leasing and licensing. The nomenclature of the agreement entered between the parties is License Deed and the amount agreed to be paid by GRT to the appellant is to be called as per agreement as monthly licence fee . The nomenclature used to describe the agreement is irrelevant and the intention of the parties as well as the character of the agreement has to be looked into to decide whether there is activity of ren ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion India Ltd. Vs. Commissioner of Service Tax, Hyderabad 2013 (31) S.T.R. 343 (Tri. Bang.) and Jai Mahal Hotels Pvt. Limited Vs. Commissioner of Central Excise, Jaipur 2014 (36) S.T.R. 669 (Tri. Del.). The relevant discussions reads as under: The facts of the case are that M/s. Green Royale Enterprises Ltd., the appellants herein, are engaged in the business of running hotels. The business assets of Hotel Connemara, Madras, Westend Hotel, Bangalore and Savoy Hotel, Ooty owned by Spenser Co. were transferred at book cost to M/s. Spencer International Hotels Ltd. (SIHL) vide an agreement dated 28-6-1978, which also granted long term lease of the land of the said three hotels to the latter. In a subsequent agreement dated 20-3-1984, SHIL granted licence to M/s. International Hotels Company Limited (IHCL) to run, conduct and operate the above three hotels along with related facilities and business appertaining thereto for 25 years. M/s. IHCL deposited with SIHL a sum of Rs. 5 crores as interest free deposit of which the latter would refund an amount of Rs. 2.50 crores at the end of 15 years and the balance would be refunded on the expiry of the agreement. As per para 4.1 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1994, immovable property buildings used for the purpose of accommodation including hotels are not included within the scope of the definition. Hence license fees received by the appellant from IHCL is not chargeable to service tax under the head Renting of Immovable Property Service . (ii) The main object of agreement between the appellant and IHCL is to assign entire business of the hotel to IHCL and not for renting of immovable property. The license fees is received by the appellant as a percentage of net sales. Hence transaction between the appellant and the IHCL is of sharing of business profit and not merely renting of immovable property. (iii) Permitting the usage of hotel property and giving the hotel property for running the hotel is incidental to the assigning of running the entire hotel business and by applying the predominance test, it is the assigning of the entire hotel business for conducting which is the predominant activity. Permitting usage of property is merely incidental, which cannot be taxed separately based on the ratio of following judgments : (i) Dr. Lal Path Lab. - 2006 (4) S.T.R. 527 (T) upheld by P H - HC- 2007 (8) S.T.R. 337 (P H) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dt. 27-6-1984 between SHIL and IHCL and subsequent agreement dated 18/2010 entered into between SHIL and the appellant hence the entire proceedings are hit by limitation. (vi) The present case involves interpretation of provisions and further appellant had provided all the details sought for by the department. In the circumstances, the imposition of penalties cannot be sustained. . .. 5.2 From an analysis of the above definitions, in our opinion, to fall within the taxable entry of renting of immovable property , the immovable rented out should be the genre exemplified in Explanation 1 reproduced supra. In the present case, however, the agreement between the appellant and IHCL is not merely for renting of the hotel or land appurtenant thereto etc., but is license to run, conduct and operate Connemara hotel together with all the related facilities and business appertaining thereto . It appears to reason that not just the immovable property portion of the hotel, but also, the employees and other staff, goodwill and other paraphernalia are also taken into consideration by the two parties involved while framing the license agreement. It is also relevant to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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