Renting of immovable property - Board has the last laugh

By TIOL News Service

NEW DELHI, FEB 26, 2010: WHO is the final authority in matters relating to Service Tax? If you are under the mistaken impression that it is a Supreme Court, CBEC has again reminded the tax payers that it is the final authority and not the court. When the Government introduced a levy of Service Tax on renting of immovable property in 2007, some assesses in the country had the audacity to approach the various High Courts and Delhi High Court had in the Home Solution Retail India case – 2009-TIOL-196-HC-DEL-STheld that renting of immovable property was per se not an activity in relation to renting and so renting by itself was not taxable. Even after knowing fully well that the Government is appealing to the Supreme Court, some brave assessee still had the guts not to pay the Service Tax.

Even when the good Board advised them to pay the tax as the matter was taken to Supreme Court, some litigants again approached the Delhi High Court and Delhi High Court did not exactly appreciate the Board advised the High Court was told that Board advice would be withdrawn.

Before challenging the Government Policy in the higher courts, the tax payers of the country should realize that however high the courts are, there is a still a higher authority namely the bureaucrat who has an undo button which can simply delete the best of judgments, beyond the Recycle Bin. This is exactly what happened in this year Budget.

The Finance Bill has amended subclause zzzz of clause 105 of Section 65 of the Finance Act 1994, which entry read as ‘to any person by any other person in relation to renting of immovable property ………..’

Now it would read as ‘to any person by any other person by renting of immovable property are any other service in relation to such renting……’. And any action taken or not taken under new clause shall be deemed to have been taken legally and recovery would be made as if the amendment was always in force.

Beware before going to Court!