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TMI Blog2023 (7) TMI 583X X X X Extracts X X X X X X X X Extracts X X X X ..... The appellant has also averred that Section 65(90a) of the Finance Act, 1994 as amended defines renting of immovable property and Section 65(105)(zzzz) of the Finance Act, 1994 defines taxable service provided in relation to renting of immovable property. In terms of Section 65(105)(zzzz) hotels are specifically excluded under clause (d) to Explanation 1 of Section 65(105)(zzzz). The words including hotels used in the Explanation to Section 65(105)(zzzz) of the Finance Act, 1994 while listing out the exclusions from the scope, has to be given its plain meaning. The issue have been examined in the Coordinate Bench decision in Grand Royale Enterprises [ 2018 (10) TMI 656 - CESTAT CHENNAI] where it was held that the transaction between the appellant and IHCL is definitely not one of renting of immovable property but a business transaction between the two, where the consideration is not like a regular rent but is dependent on the annual performance and profits of the hotel. The said judgment was affirmed by the Hon ble Apex court in COMMISSIONER OF SERVICE TAX 1 CHENNAI VERSUS GRAND ROYALE ENTERPRISES LTD. [ 2022 (9) TMI 273 - SC ORDER ], hence the same is bindi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess and therefore the appellant is liable to pay service tax under renting of immovable property service. The Adjudicating Authority after following due proceedings has vide the impugned order confirmed duty liability under taxable service Renting of Immovable Property on the ground that the consideration is for leasing out the building and that the assessee do not have a say in the day to day / normal running of the hotel in the said property, apart from letting the property to be used by Palmgrove for running hotel in their name. Aggrieved by the said order the appellant is before us in appeal. 3. No cross objection has been filed by the respondent-department. 4. We have heard learned counsel Smt. Radhika Chandrasekar for the appellant and learned AR Shri M. Ambe, Deputy Commissioner for Revenue. 5. The learned counsel for the appellant submitted that the agreement entered into with Palmgrove is a business arrangement wherein the appellant has permitted Palmgrove to recommence the hotel and run, conduct, manage and operate and market the same as per the terms of the agreement. The amount received is in the nature of sharing of profits and cannot be considered as rent. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsideration is termed as royalty and the quantum of consideration as agreed upon as a variable percentage of the operative income, it does not mean that the assessee is participating in the day-to-day business of the hotel. He also referred to the judgment of the Hon'ble Supreme Court in the case of Moped India Limited v. Assistant Collector of Central Excise Nellore and Others [1986 (23) E.L.T. 8 (S.C.) / (1986) 1 SCC 125], wherein it was held that the amount allowed to the dealer has been referred to in the agreement as commission was a trade discount and the label given by the parties would not be a determinative factor to call it as a trade discount or a commission. He also drew attention to the coordinate Bench of this Tribunal s judgment in the case of M/s. Spencer International Hotels Ltd. Vs. CGST Central Excise vide Final Order No. 40461 to 40462 of 2023 dated 22.6.2023 wherein the Tribunal had examined the argument that the amount received by the appellant from M/s. IHCL (company that had taken the hotel for doing business) is not in the nature of rent received for permitting to use the immovable property and that it is in the nature of joint venture agreement wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant from M/s. IHCL (company that had taken the hotel for doing business) is not in the nature of rent received for permitting to use the immovable property and that it is in the nature of joint venture agreement where both parties have agreed to share the profits in particular manner , is not the position in this case as the agreement specifically states that the transaction contemplated by this agreement is neither in the nature of a partnership or a joint venture. We however note that as per the agreement the hotel is run, conducted, maintained and managed by the conductor / operator at the costs, risks, expenses and responsibility of the conductor / operator alone and on a principal-to-principal basis. The appellant has also averred that Section 65(90a) of the Finance Act, 1994 as amended defines renting of immovable property and Section 65(105)(zzzz) of the Finance Act, 1994 defines taxable service provided in relation to renting of immovable property. In terms of Section 65(105)(zzzz) hotels are specifically excluded under clause (d) to Explanation 1 of Section 65(105)(zzzz). The words including hotels used in the Explanation to Section 65(105)(zzzz) of the Finance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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 note that there is no fixed rent that is payable as would be expected in a normal renting of immovable property transaction. On the other hand, the consideration for license to run, conduct and operate the hotel is a license fee equivalent to 15%/20% of the annual sales from the operation of the hotels. This being so, the license fee that would accrue to the appellant is only a percentage of the turnover. Since the turnover is never static but is dynamic and will go up or down in every succeeding year, the lease license fees would also wax or wane in resonance. The license fees are accruing to the appellants therefore have an umbilical card relation with the turnover and profits of the hotel business under IHCL. In our view therefore, the transaction between the appellant and IHCL is def ..... X X X X Extracts X X X X X X X X Extracts X X X X
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