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TMI Blog2025 (4) TMI 1188X X X X Extracts X X X X X X X X Extracts X X X X ..... e are that the appellant had entered into an agreement with Kolkata Municipal Corporation (KMC in short) to develop and maintain 8-acres of land. As per the lease agreement with KMC, appellant is entitled to all the construction / erection / structure of any nature whatsoever as the absolute owner thereof and to enter into agreement for transfer of its leasehold rights together with the constructed areas belonging to it. Accordingly, the appellant sub-leased the properties to various parties. In respect of the land to be mutated by the sub-lessee in their name, the sub-lessee is deemed to be the lessee of the said plot and has to apply to KMC for renewal of lease after expiry of the 99 years lease period. After mutation, the full rights and title goes in favour of the sub-lessee, subject to renewal of the original deed after its expiry. Therefore, the appellant treated the said transaction as 'sale of leasehold rights' and not paid service tax on the outright transfer of lease hold rights. However, the department considered the transaction of long term lease undertaken by the appellant as a taxable service liable for service tax under the category of 'Renting of immovable prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d order. 3.2. The applicant enclosed a written opinion on the terms of the sub-lease deed, from a Solicitor/Advocate firm M/s Kanodia & Co. which is on similar lines. 3.3. The applicant further states that in a similar case before the same division bench, the Hon'ble CESTAT, Kolkata has held that Permanent transfer of leasehold rights by appellant to business entities would not be termed as sub-lease to bring it under ambit of levy of Service Tax; it could only be termed as 'sale of leasehold rights' which was not liable to Service Tax. This judgement was passed in the case of Luxmi Township Ltd. Versus Commissioner CGST & C. Ex., Siliguri [2023 (79) G.S.T.L. 232 (Tri. -Kolkata)]. 3.4. Regarding the demand of service tax confirmed in the impugned order under the category of 'Business Auxiliary Service (BAS in short), the appellant submits that out of the total turnover of Rs. 2460689/- on which service tax is confirmed in the impugned order under 'BAS' Rs.1923362/- is on account of electricity Rs.170000/-- is on account of Legal Charges Rs.307627/- is on account of Misc. Charges and Rs.59700/- is on account of sundry balance written off. However, in the impugned order, the L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gned order. She submitted that sub leasing of the property amounts to 'renting' as defined under Section 65 (90a) of the Finance Act, 1994. In support of her above contention, she cited the decision of the Tribunal, Delhi in the case of GREATER NOIDA INDL. DEVELOPMENT AUTHORITY Versus C.C.E. & S.T., NOIDA 2015 (38) S.T.R. 1062 (Tri. - Del.), wherein it has been held that consideration received towards sub-leasing is chargeable to service tax under the category of 'Renting of Immovable Property Service'. Accordingly, she prayed for upholding the demands confirmed in the impugned order. 5. Heard both sides and perused the appeal documents. 6. We observe that the appellant had entered into an agreement with Kolkata Municipal Corporation (KMC in short) to develop and maintain 8-acres of land. To understand the nature of the transaction, it is required to analyse some of the Clauses in the agreement. 6.1. The appellant submitted extracts of relevant clauses from the sub-lease agreement dated 24.09.2009 entered by them with one of the sub- lessee Mr. Kumbhan Das Mundhra. The relevant Clauses of the agreement are reproduced below: Clause I:The said lease Agreement al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ischarge all the dues and liabilities to the sub Lessor or the Maintenance Company in full and a no due certificate to that effect is issued / granted; ...................... Clause o) Before transferring, assigning, leasing or sub-leasing any Unit, 21 days notice of the intension to do so shall be given by the Sub Lessee to the Sub Lessor or the maintenance company. Provided however that nothing herein shall effect the absolute right of the Sub Lessees to transfer the unit to any person at such price as the Sub Lessee may choose; ....................... 6.2. On a perusal of the Clauses of the sub-lease agreement, it becomes clear that: * Full rights and the Title hitherto available with the Lessor have been transferred to the sub- lessees. * After the Deeds of sub-lease has been executed in favour of the sub-lessees, the land transferred has been mutated in the name of the respective sub-lessees. * After the Deed of Assignment, the sub-lessee is deemed to be the lessee of the said plot. * The sub-lessee is responsible for renewal of the lease deed after its expiry. 6.3. We observe that the Appellant does not have any reversionary right of the property after the per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Accordingly, we hold that the permanent transfer of lease hold right by appellant to various parties would not be liable to Service Tax. 6.5. We observe that the one time Premium received by the Appellant cannot be equated with rent payable on regular intervals for continuous use of the property. The difference between the Premium or Salami and the lease rent as envisaged in Section 105 of the Transfer of Property Act, 1882, has been dealt in the decision of the Hon'ble High Court in the case of A.R. Krishnamurthy and A.R. Rajagopalan v. Commissioner of Income Tax, Madras, (1982) 133 ITR 922 (Mad.). From the decision cited above, we observe that the price paid for transfer of possession or the right to enjoy the property is called the 'Premium or Salami' and the periodical payments made for continuous use of the property under lease is called 'rent'. The Applicant has received only a one-time payment as Premium and hence by relying on the above decision it becomes clear that the Premium received by the Appellant cannot be called as 'rent'. 6.6. The difference between the 'Premium' and 'Rent' has been highlighted in the Judgment of the Hon'ble Supreme Court in the case of Commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re 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 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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