By TIOL News Service

MUMBAI, APRIL 11, 2018: THE Appellants are running a resort and in precincts thereof the structures/locations are given on hire for film/video shooting.

Appellants are discharging service tax under the category of ‘Renting of Immovable Property Services'. They are also letting out the cottage/rooms in their hotel/resort on which no service tax is being paid.

SCN was issued demanding service tax on letting out of rooms/cottages on the ground that the same are also taxable under the category of ‘Renting of Immovable Property Services'.

As the tax liability was upheld along with penalties, the appellant is before the CESTAT.

It is submitted that room rent received by Hotel/Resort was brought into tax net w.e.f 01.05.2011 under the category of “Short term accommodation service' and, therefore, the demand for the period prior to this date is not sustainable. Further, the activity of letting out of room/cottage is different from letting out of structure/ locations for shooting and hence cannot be clubbed into same category. More importantly, the SCN proposed the tax demand under the category of ‘Business Support Service", however, the same was confirmed in adjudication under the category of ‘Renting of Immovable Property Services'. As the demand has been made beyond the scope of SCN,same is not sustainable, the appellant emphasized.

The AR supported the impugned order and submitted that the rooms were given only to those persons to whom location hire charges are charged; that as per Explanation 2 of the definition of taxable service provided under Section 65(105)(zzzz) it is evident that an immovable property, partly for use in the course of furtherance of business or commerce and partly for residential or any other purposes shall be deemed to be immovable property for use in the course of furtherance of business or commerce. And, hence service tax is applicable as the room charges is to be included in actual value of location hire charges.

The Bench considered the submissions and inter alia observed –

++ We find that the demand against the Appellant was proposed under the category of ‘Business Support Service' but was confirmed under category of ‘Renting of Immovable Property Service'. Clearly the demand was confirmed by going beyond the scope of show cause notice.

++ Adjudicating authority has confirmed demand by interpreting deeming fiction provided under Section 65(105)(zzzz). We find that the scope of said section/clause is restricted only in those cases when the same property is used partly for residence and partly for use of business or commerce.

++ The appellant can give room on rent to other party and it is not necessary that it is only for parties who take locations on Hire for shooting. It can be used for two different parties for two different purposes. The room/cottages are meant for stay and not for letting out on hire for the purpose of shooting.

Concluding that there is no reason to uphold the impugned order, the same was set aside and the appeal was allowed with consequential relief.