Luxmi Township Limited Vs Commissioner of CGST & CX (CESTAT Kolkata)
CESTAT Kolkata held that one time payment, in the form of Premium or Salami for transfer of interest in the property cannot be equated as rent and hence the same is not exigible to the service tax. Accordingly, demand of service tax set aside.
Facts- The Appellant are engaged, inter alia, in the business of setting up of modern Townships which include infrastructure and support facilities. The Appellant obtained permission from Government of West Bengal to occupy land for the purpose of setting up of a satellite Township. They executed an indenture of Lease dated 21.11.2003, at the District Sub-Registrar office, siliguri, granting a lease of 393.25 acres of land in favour of the Appellant.
The Appellant (Assignor) had subsequently executed “Deeds of Assignments” with some business entities (Assignees) sub-leasing a part of land out of the total land measuring 393.25 acres which was taken on lease by them from the Government of West Bengal on 21.11.2003.
The department was of the view that the Appellant has sub-leased or assigned the plots to the said business/commercial entities on long term basis for a consideration and thus rendered taxable services relating to renting, letting, leasing or other similar arrangements of immovable property and such activity would fall within the purview of service tax.
Conclusion- Held that consideration, ie one time payment, in the form of Premium or Salami and consideration in the form of ‘rent’ connotes two different types of consideration. In the instant case, we observe that the Appellant has not received any ‘rent’ from the assignees and the rent is payable by the assignees to the state of West Bengal through DLLRO. Accordingly, we hold that the premium or salami paid to the Appellant for transfer of interest in the property, is not exigible to the service tax.
They were filing returns regularly and disclosed the rent income in which they have paid service If the department has any doubt about the service tax paid by them, they could have clarified the same with the Appellant. Even after knowing the details, the officers took almost two years to issue the Notice. In view of the above, we hold that there is no suppression involved in this case and the entire demand issued in this case is barred by limitation. Accordingly, we hold that the demand is not sustainable on the ground of limitation also.
FULL TEXT OF THE CESTAT KOLKATA ORDER
Briefly stated facts of the case are that the Appellant, M/s Luxmi Township Limited, are engaged, inter alia, in the business of setting up of modern Townships which includes infrastructure and support facilities. The Appellant obtained permission from Government of West Bengal to occupy land for the purpose of setting up of a satellite Township. They executed an indenture of Lease dated 21.11.2003, at the District Sub-Registrar office, siliguri, granting a lease of 393.25 acres of land in favour of the Appellant. The lease is for a period of 99 years from 23.04.2002, with an option for renewal of the same for a further period of 99 years thereafter, upon the option of the lessee, with the same terms and conditions except the rent, which may be varied. As per the parent lease deed, the lessee shall pay an annual rent of Rs 2/- per decimal of the leasehold land in the District Land and Land Reforms Office (DLLRO), Darjeeling, within first 60 days of the year for which the rent is payable.
2. The Appellant (Assignor) had subsequently executed “Deeds of Assignments” with some business entities (Assignees) sub-leasing a part of land out of the total land measuring 393.25 acres which was taken on lease by them from the Government of West Bengal on 21.11.2003. The present issue is related to the following sub-leasing deeds executed by the Appellant with various companies:
a) Deed No.00787 of 2008 executed with M/s. Ambuja Realty Development Ltd.
b) Deed No.06226 of 2009 executed with M/s. Neotia Healthcare Initiative Ltd.,
c) Deed No.07359 of 2011 executed with M/s. Choicest Enterprises Ltd.,
d) Deed No.11220 of 2012 executed with M/s. Megha Builders,
e) Deed No.04096 of 2012 of MLA-OSL Ltd.
4. On perusal of the Deeds of Assignments executed by the Appellant with the abovementioned companies, the department was of the view that the Appellant has sub-leased or assigned the plots to the said business/commercial entities on long term basis for a consideration and thus rendered taxable services relating to renting, letting, leasing or other similar arrangements of immovable property and such activity would fall within the purview of service tax.
5. The amount of ‘Salami’ or ‘Premium’ received by the Appellant towards sub-leasing of the said land as per the Deeds of Assignments are as follows:
(i) 2,29,59,750/- received from M/s Choicest enterprises Ltd.
(ii) 17,69,54,000/- received from M/s Megha builders
(iii) 25,99,38,250/- received from M/s MLA-OSL Developers.
(iv) 2,41,25,000/- received from M/s Neotia Healthcare Initiative Ltd.
(v) Rs. 19,42,05,000/- was received from M/s Ambuja Realty Development Ltd.
6. Finance Act, 2007 read with chapter V of the Finance Act, 1994 brought the services of “Renting of Immovable Property” for furtherance of business and commerce under the net of service tax w.e.f. 01.06.2007. The Finance Act, 2008 had inserted an explanation to the definition of “Renting of Immovable Property” w.e.f. 16.05.2008, to clarify that renting of immovable property services includes allowing or permitting the use of space in an immovable property, irrespective of the transfer of possession or control of the immovable property. Finance Act 2010 specifically included ‘vacant land given on lease for construction of building or temporary structure at a later stage to be used for furtherance of business or commerce’ within the definition of ‘Renting of immovable property’
7. In view of the amended definition of ‘Renting of Immovable property Service’, the department was of the view that sub-leasing of the vacant land by the Appellant to Business entities on receipt of consideration would fall within the ambit of service tax and accordingly, the Appellant would be liable to pay service tax on the sub-leases executed on or after 01.07.2010, on the consideration received. Such services are liable to service tax after 01.07.2012 also, as stipulated in Section 66B of the Finance Act, 1994, as ‘Declared service’.
8. The details of the particulars of land which has been subleased by the said assessee to the three business entities along with details of the deeds of assignment and date of execution are given below:
