ST - Renting of Immovable Property - Property tax proportionate to period for which abatement is claimed shall be excluded while computing gross amount charged for purpose of levy of service tax as per notfn. 24/2007 – No excess abatement availed : CESTAT
By TIOL News Service
MUMBAI, JUNE 28, 2016: THE adjudicating authority dropped the ST demand of Rs.8,85,885/- raised against the appellant as provider of ‘Renting of immovable property' service. However, in Revenue appeal, the Commissioner (A) reversed this decision and so the appellant is before the CESTAT.
The dispute centers around the Notification 24/2007-ST which reads thus –
"In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994) (hereinafter referred to as the Finance Act), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable service of renting of immovable property, referred to in sub-clause (zzzz) of clause (105) of section 65 of the Finance Act, from so much of the service tax leviable thereon as is in excess of the service tax calculated on a value which is equivalent to the gross amount charged for renting of such immovable property less taxes on such property, namely property tax levied and collected by local bodies:
Provided that any amount such as interest, penalty paid to the local authority by the service provider on account of delayed payment of property tax or any other reasons shall not be treated as property tax for the purposes of deduction from the gross amount charged:
Provided further that wherever the period for which property tax paid is different from the period for which service tax is paid, property tax proportionate to the period for which service tax is paid shall be calculated and the amount so calculated shall be excluded from the gross amount charged for renting of the immovable property for the said period, for the purposes of levy of service tax.
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Example:
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Property tax paid for April to September
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=
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Rs. 12,000/-
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Rent received for April
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=
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Rs. 1,00,000/-
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Service tax payable for April
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=
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Rs. 98,000/- (1,00,000–2,000) * applicable rate of service tax
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2. This notification shall come into force on the 1st day of June, 2007."
The facts of the case are that the appellant is the owner of ‘building towers' which are liable to property tax levied and collected by the Pune Municipal Corporation.
The appellant had constructed an internal road on BOT basis - ‘Build, Operate and Transfer' basis rendering the appellant eligible for setting off the cost incurred in such construction of the internal road towards 75% of the tax due for each assessment period from 1 st April 2004 to 31 st March 2009.
Combining, both the payment of property tax and set-off, the appellant claimed abatement of Rs.2,74,55,667/- in accordance with notification no. 24/2007-ST dated 22 nd May 2007.
Revenue has worked out the demand based on the following two counts -
+ Payment of Rs.60,26,659/-, with the tax implication of Rs.7,44,895/-, related to tax for the period prior to 1 st June 2007. The service itself become liable to tax w.e.f 1 st June 2007 and the exemption notification granting abatement was also effective from that date.
+ Revenue also sought to deny abatement of Rs.13,68,831/- with the tax implications of Rs.1,40,990/-, on the ground that it was availed in April 2009 whereas the payment of tax was effected only on 2 nd July 2009.
As mentioned, the adjudicating authority had not accepted these allegations & dropped the demand but the Commissioner (A) sided with the Revenue.
In appeal before the CESTAT, the appellant adverted to the impugned notification 24/2007-ST and also the amendment made in rule 6 of STR, 1994 by insertion of sub-rule 4C (by notification 28/2007-ST) justifying their claim of adjustment of excess tax paid on account of non-availment of the abatement of property tax. The sub-rule reads –
"4C. Notwithstanding anything contained in sub-rules (4), (4A) and (4B), where the person liable to pay service tax in respect of services provided or to be provided in relation to renting of immovable property, referred to in sub-clause (zzzz) of clause (105) of section 65 of the Act, has paid to the credit of Central Government any amount in excess of the amount required to be paid towards service tax liability for a month or quarter , as the case may be, on account of non-availment of deduction of property tax paid in terms of notification No. 24/2007 , dated the 22nd May, 2007, from the gross amount charged for renting of the immovable property for the said period at the time of payment of service tax, the assessee may adjust such excess amount paid by him against his service tax liability within one year from the date of payment of such property tax . The details of such adjustment shall be intimated to the Superintendent of Central Excise having jurisdiction over the service provider within a period of fifteen days from the date of such adjustment.".
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The Bench observed –
"5. We have gone through the various documents submitted by the appellant and we find that the appellant had discharged the property tax liability for the period from 2004-05 onwards till 2008-09 to the extent of Rs.8,60,74,774/-. It is seen that Rs.3,99,17,748/- pertains to the year 2008-09 and Rs.1,34,79,909/- to the year 2007-08 which are the periods after the service was made leviable to tax. It is also seen that the abatement being claimed for the period from October 2008 to March 2009 is to the extent of Rs.2,35,45,869/- which is well within the limit of the claimable amount for the year 2007-08 and 2008-09. Further, the claim for the month of April 2009 amounting to Rs.39,09,798/- is within the remaining eligible balance after the claim for abatement for the period up to March 2009. No evidence to the contrary has been furnished by Revenue."
Holding that there is no reason to disallow the abatement claimed by the appellant, the impugned order was set aside and the appeal was allowed.
(See 2016-TIOL-1551-CESTAT-MUM)
