By TIOL News Service

MUMBAI, JAN 18, 2019: THE appellant rented its property to State Bank of India on lease basis against receipt of monetary consideration.

Alleging that such activity is taxable under the category of "Renting of immovable property service", SCN was issued seeking recovery of Service Tax of Rs.10,64,474/- for the period 2007-08 to 2011-12.

The demand was confirmed along with interest by the adjudicating authority and penalties were imposed.

Since the Commissioner(A) did not find anything amiss in this order, he upheld the same and consequently appellant is before the CESTAT.

The appellant submitted that the lease deed executed between the appellant and SBI was under litigation and the matter was pending before the Small Causes Court at Bombay and on positive decree by the said Court, appeal was also filed before the appellate authority. It is further submitted that pursuant to the orders of the Small Causes Court and also as per the directions of the Bombay High Court vide Order dated 20.01.2012, the rent amount was deposited with the Registrar of the High Court.

Inasmuch as since the appellant did not receive any amount for letting out its property, the case of the appellant should not fall under the purview of Rule 6 of the Service Tax Rules, 1994 (up to 31.03.2011) and thereafter under the Point of Taxation Rules, 2011. In short, the appellant is not liable to pay any service tax or penalties, interest etc.

The AR informed that the appellant had received the rent @ Rs.5/- lakhs per month from February 2010 to August 2010 and service tax is payable on such amount.

The Bench considered the submissions and inter alia observed-

++ Since Rule 6 of Service Tax Rules, 1994 and Point of Taxation Rules, 2011 mandates that service tax is liable to be paid on receipt of consideration towards rent and in view of the fact that the appellant did not receive the amount in dispute from the Bank, I am of the opinion that the service tax demand cannot be fastened on the appellant.

++ However on perusal of the records, I find that there are contrary findings in context with the issue by the adjudicating / appellate authority inasmuch as the appellant had vehemently contested that it did not receive any amount from SBI towards rent for letting out the property.

For ascertaining the factual aspect, the matter was remanded to the original authority.

(See 2019-TIOL-215-CESTAT-MUM)