2024-VIL-1462-CESTAT-AHM-ST
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SERVICE TAX CESTAT Cases

Service Tax - Renting of Immovable Property, Lease, Sub-lease - Appellant had shown an amount as "Revenue from Real Estate Schemes" which it claimed pertained to lease premiums received from lessees with whom the appellant had entered into lease agreements - appellant had acquired land from Gujarat Informatics Ltd. (GIL) and developed the property, which it then transferred to its clients on a long-term lease basis - Department issued show cause notices proposing service tax demands on the lease premiums received by the appellant - whether the permanent transfer of the developed property lease hold rights by the Appellant to the their customers would be termed as ‘sub-lease’ to bring it under the ambit of levy of service tax or it can be termed as ‘sale of leasehold rights’ not liable to service tax - HELD - the appellant had executed a deed with GIL and acquired the land for a period of 32 years, and after development, it transferred the leasehold rights to its clients through a conveyance deed - the ownership of the developed property, along with all rights, was passed to the clients, and the appellant did not have any reversionary rights over the property - Appellant also paid the stamp duty and registration fees when they hand over possession to the client at the rate applicable to outright sale of property and not at the rate which applicable to the agreement to renting of a property. Such transfer of leasehold right of developed property by the appellant on lumsum amount cannot be called as ‘lease’ and hence it would not fall under the definition of taxable service as defined under Section 65(105)(zzzz) of the Finance Act, 1994 - once the Appellant executed the Deed in favour of the customers, the ‘Title’ of the property which has been assigned to them has been transferred in the name of the clients/ customers. Subsequently, the property have also been mutated in the name of the respective clients. Therefore, the transaction must be treated as ‘sale of leasehold rights’ and service tax would not be applicable on the outright transfer of rights - the one-time payment received by the appellant as "premium" cannot be considered as "rent" for the purpose of service tax liability under "renting of immovable property" - the impugned orders are set aside and appeals are allowed - Whether the extended period of limitation under Section 73(1) of the Finance Act, 1994 can be invoked in the present case – HELD - the extended period of limitation under Section 73(1) of the Finance Act, 1994 cannot be invoked - the appellant had regularly filed ST-3 returns, and the department had carried out audits on a yearly basis. There was no suppression or willful misstatement on the part of the appellant, and the issue involved the interpretation of the statute on the taxability of renting of immovable property.
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