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TMI Blog2025 (2) TMI 211X X X X Extracts X X X X X X X X Extracts X X X X ..... of immovable property. Section 65B (44) of the Finance Act defines "service" to mean any activity carried out by a person for another for consideration, and includes a "declared service". It is seen that consideration is received in the form of premium which would be included in the definition of "renting". "Renting of immovable property" is a "declared service" under section 66E of the Finance Act. Once "renting of immovable property" is a declared service and so taxable under section 66B of the Finance Act, it cannot be contended by the appellant that it will also be included in those services which are excluded under section 65B (44) of the Finance Act, for it can never be the intention of the legislature to include a "service" as exigible to service tax and at the same time also exclude that "service" from taxability. The contention of the appellant that it is excluded from taxability under sub-clause (a)(i) of section 65B(44) of the Finance Act cannot also be accepted for this reason. Conclusion - The value of "premium" or "salami" is exigible to service tax under "renting of immovable property" for the period prior to 01.07.2012 under section 65(105)(zzzz) of the Finance A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Member has been signed by Judicial Member as well. At the same time, the Judicial Member has written a dissenting judgment but at the end of his judgment, he says he agrees with the Technical Member. In paragraph 7 of the dissenting judgment, the Judicial Member says he has difference of opinion on the findings of the Technical Member. If the Judicial Member did not agree with the Technical Member, the right thing would have been to refer to a third member, instead, the Judicial Member has started of by saying he disagrees with the Technical Member but in the end he says he agrees with the observations passed by the Technical Member. 2. We are informed that similar issue had arisen in Service Tax Appeal No.50553 of 2017 (CESTAT Delhi) in which, by an order dated 4th February 2022, the President and Technical Member have expressed their opinion that the papers may be placed before the President of the Tribunal to nominate a Larger Bench. In paragraph 17 of the order, the order impugned in the present petition is also referred to. Therefore, we hereby quash and set aside the impugned order dated 5th August 2019 and direct the matter be also tagged alongwith Service Tax Appeal No.5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssession of the land for cultivation under the lease. In all those cases under appeal the leases were oral and the duration and conditions thereof were regulated by statute--the Assam Tenancy Act. Salami is not a recurring or periodical payment or a fee or fine levied at fixed intervals from the tenant for the same holding." (emphasis supplied) 8. The aforesaid two decisions were considered by the Supreme Court in Commissioner of Income-Tax vs. Panbari Tea Co. Ltd [1965 57 ITR 422 (S.C.)]. The Supreme Court examined the definition of lease in section 105 of the Transfer of Property Act, 1882 and noted that this section brings about a distinction between the price paid for transfer of a right to enjoy the property, and the rent to be paid periodically. The Supreme Court held that when the interest of the lessor is parted with for a price, the price paid is premium or salami, but the periodical payments made for continuous enjoyment of the benefits under the lease are in the nature of rent. The relevant portion of the judgment of the Supreme Court is reproduced below: "5. Under Section 105 of the Transfer of Property Act, a lease of immovable property is a transfer of a right ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this way. When the interest of the lessor is parted for a price the price paid is premium or Salami but the periodical payments made for the continuous enjoyment of the benefits under the lease are in the nature of rent; the former is a capital receipt and the latter a revenue receipt. Parties may camouflage the real nature of the transaction by using clever phraseology and, therefore, it is not the form but the circumstances of the transaction that matter. The nomenclature used may not be decisive or conclusive but it helps the courts, having regard to the other circumstances, to ascertain the intention of the parties. (See Commissioner of Income-tax, Assam etc., v. The Panbari Tea Co. Ltd.)." (emphasis supplied) 10. In A.R. Krishnaurthy/A.R. Rajagopalan vs. Commissioner of Income-Tax [(1981) 6 Taxman 289 (Mad.)], the Madras High Court also observed as follows: "6. xxxxxxxxxxx. Section 105 of the Transfer of Property Act defines a lease right to enjoy such property, made for a certain time, express or implied, or in perpetuity, in consideration of a price paid or promised, or of money, a share of crops, service or any other thing of value, to be rendered periodically or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... many charges collected by RIICO from such allottees, it also collected economic rent and premium. Economic rent is the annual lease rent charged by RIICO from the allottees, while premium is a onetime amount paid by the allottees towards the cost of vacant land transferred to them. 14. The department issued numerous show cause notices to RIICO demanding service tax on the charges received from the allottees and major portion of the demand of service tax was on account of 'premium' for the land allotted to the allottees, which has also been termed as 'development charges'. The period involved in this appeal is from 01.10.2014 to 30.06.2015. The Commissioner found that RIICO charged consideration from the lessee for allotment of the land and executed lease deeds. The Commissioner also found that after execution of the lease deed, RIICO also charged an annual consideration from the lessees. The one time amount called premium paid to RIICO was found to be taxable under section 66B of the Finance Act. CIDCO 15. The order dated 29.08.2013 passed by the Commissioner confirms the demand of service tax for the period between 01.06.2007 to 31.03.2012. CIDCO had industrial plots which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 for the purpose of charging of Service Tax for which no valid reasons have been given. Therefore, the Order-in-Original dated 30-4-2013 confirming the Service Tax demand on the premium amount is not correct and to this extent, the Service Tax demand would not be sustainable." (emphasis supplied) 18. The decision of the Tribunal in Greater Noida was followed by the Tribunal in Kagal Nagar Parishad and it was observed: "4. We have carefully considered the submissions made by both sides and perused the records. We find that the Revenue sought to tax the one time premium deposit, which is not refundable under the head of re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to any person, by any other person in relation to renting of immovable property for use in the course or furtherance of business or commerce. Explanation-1. xxxxxxxxxx but does not include xxxxxxxxxxxx Explanation 2.- xxx xxx xxx From 01.07.2010 "Section 65 (105)- "taxable service" means any service provided or to be provided- (zzzz) 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. Explanation 1- xxx xxx xxx Explanation 2.- xxx xxx xxx" From 01.07.2012 24. It would also be appropriate to reproduce sections 65(41), 65B(44), 66B, 66D and 66E of the Finance Act inserted w.e.f. 01.07.2012 and they are as follows: "Section 65(41) "renting" means allowing, permitting or granting access, entry, occupation, use or any such facility, wholly or partly, in an immovable property, with or without the transfer of possession or control of the said immovable property and includes letting, leasing, licensing or other similar arrangements in respect of immovable property. Section 65(44) "service" means any activity carried out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ideration of a price paid or promised, or of money, a share of crops, service or any other thing of value, to be rendered periodically or on specified occasions to the transferor by the transferee, who accepts the transfer on such terms. The transferor is called the lessor, the transferee is called the lessee, the price is called the premium, and the money, share service or other thing to be so rendered is called the rent." 30. The Supreme Court in Panbari Tea, in the context of section 105 of the Transfer of Property Act, held that when the interest of the lessor is parted with for a price, the price paid is called premium but the periodical payment made for continuous enjoyment of the benefits under the lease is called rent. Thus, premium is a consideration paid for being let into possession for the purpose of creating a tenancy. There is, therefore, a distinction between the price paid for transfer of a right to enjoy the property and the rent to be paid periodically for continuous enjoyment of the benefits under the lease. A lease, therefore, would include both premium and the periodical rent. Such being the position, when 'renting of immovable property' includes leasing, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n before the Tripura High Court to challenge the demand made for this service tax amount. This Writ Petition was dismissed holding that premium is a part of the lease money and, therefore, both premium and rent are exigible to service tax. The observations of the High Court are as follows: "4. We are not at all inclined to even issue notice in the writ petition. A perusal of Section 65(90a) and Section 65(105)(zzzz) of the Finance Act, 1994 as quoted in the letter dated 23-11-2015 clearly shows that "Renting of Immovable Property Service" includes renting, letting, leasing, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 07.2012. "Service" has been defined under section 65B(44) of the Finance Act to mean any activity carried out by a person for another for consideration, and includes a declared service, but will not include an activity which constitutes merely a transfer of title in goods or immovable property, by way of sale, gift or in any other manner; or such transfer, delivery or supply of any goods which is deemed to be a sale within the meaning of article 366 (29A) of the Constitution; or a transaction in money or actionable claim. 43. Section 66B of the Finance Act deals with charge of service tax on and after the Finance Act 2012. It provides that there shall be levied a service tax at the rate of fourteen percent on the value of all services, other than those service specified in the negative list. Section 66D of the Finance Act deals with negative list of services. Section 66E of the Finance Act deals with "declared services" and, amongst others, includes at (a) "renting of immovable property". 44. Learned counsel for the appellant submitted that section 65B(44) of the Finance Act, which defines "service", excludes an activity which constitutes merely a transfer of title in goods or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on for another for consideration, and includes a "declared service". It is seen that consideration is received in the form of premium which would be included in the definition of "renting". "Renting of immovable property" is a "declared service" under section 66E of the Finance Act. Once "renting of immovable property" is a declared service and so taxable under section 66B of the Finance Act, it cannot be contended by the appellant that it will also be included in those services which are excluded under section 65B (44) of the Finance Act, for it can never be the intention of the legislature to include a "service" as exigible to service tax and at the same time also exclude that "service" from taxability. The contention of the appellant that it is excluded from taxability under sub-clause (a)(i) of section 65B(44) of the Finance Act cannot also be accepted for this reason. CONCLUSION 49. In view of the aforesaid discussion, the inevitable conclusion that follows is that the value of "premium" during the period prior to 01.07.2012 and during the period w.e.f. 01.07.2012 would be exigible to service tax under "renting of immovable property". 50. The reference would, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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