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ST - Building let out to M/s Plasser for residential use by one of its employees - Even if employee did attend to some personal office work, demand cannot arise under 'RIP' service: CESTAT

By TIOL News Service

NEW DELHI, JULY 06, 2017: THE dispute is relating to liability of the appellant to pay service tax on a consideration received for letting out a building to M/s Plasser (India) Pvt. Ltd. for use of Thomas Hentze for residence and personal office.

Revenue entertained a view that since the term 'personal office' is mentioned in the lease agreement, the consideration shall be liable to be taxed under the category of 'renting of immovable property service' in furtherance of business or commerce.

The appellants contested the claim by submitting that the building has been used only as residence and the lease agreement makes it clear that the building has been let out only for residential purpose.

The adjudicating authority agreed but in Revenue appeal, the order was reversed and the demand of service tax of Rs.8,09,271/- was confirmed along with penalties etc.

The appellant is before the CESTAT and while reiterating their stand also submitted that the fact that the occupant of building is employee of LESSEE company by itself cannot make the premises as other than residential premises. Furthermore, for the year 2011-2012 they have never received any rental income, as there was no lease agreement and, therefore, the demand for such period is not tenable. The entire demand being for the extended period is also contested on the ground of limitation pleading that the matter of “Renting of immovable property”was under litigation [ Home Solutions Retail (I) Ltd. = 2011-TIOL-610-HC-DEL-ST-LB refers].

The AR justified the demand.

The Bench observed –

Merits:

“5. The whole demand against appellant arose because of the word 'personal office' used in the lease agreement. However, when read together the said clause - (c) will make it clear that the purpose of letting will be residential only and the lessee shall be responsible if the premises is used for other than residence. All the consequences including extra levy shall be the liability on the lessee. We note that the terms of lease make it clear that the building was let out to the appellant for residential use by one of its employees. Even if we consider that the said employee did attend to some personal office work from the said premises, the same will not make it use of premises other than the residence.”

Limitation:

“6. …appellant do have a strong case on limitation. Admittedly the tax liability on his particular tax entry has been a subject matter of substantial litigation. As observed above, Hon'ble Delhi High Court even held that renting per se is not liable to service tax and it is only services in relation to renting that are liable to service tax. This resulted in statutory amendments, including retrospective amendments, with reference to this tax liability. In fact special provision for waiver of penalties under section 80(2) of the Act was also made. ”

Concluding that the demand is not tenable both on merits as well as on time bar, the appeal was allowed.

(See 2017-TIOL-2310-CESTAT-DEL)


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