The Supreme Court has stayed an order of the Delhi High Court, which stopped the Centre from recovering service tax on renting of immovable property for commercial use, including shops and malls, from some firms. A Supreme Court bench comprising Justices Mukundakam Sharma and A R Dave stayed the interim order passed by the Delhi High Court on May 18, 2010. The Centre has challenged the order.

There shall be an interim stay of the operation of the impugned judgement till the next date, said the apex court, directing that the matter be listed for next hearing on January 20.

The High court, allowing the appeal of around 20 firms including Home Solutions Retail, had stayed the amendments made by the government in the Budget, 2010-11.

In the Finance Act, 2010, the government had amended taxing entry of “Renting of Immovable Property service”, with retrospective effect, from June 1, 2007.

The High Court had observed that in its earlier order, passed on April 18, 2009, it had held that renting of real estate cannot be regarded as a service.

A division bench in 2009 had observed that the renting of any immovable property by itself does not entail any value addition, and therefore, cannot be regarded as a service.

“Prima facie, it appears that renting of immovable property itself has been regarded as a service by virtue of the recent amendment even though this Court by virtue of the said decision on April 18, 2009 had categorically concluded that renting of immovable property by itself cannot be regarded as a service,” said the High Court while staying the recovery.

“In the meanwhile, there shall be no recovery of Service tax from the petitioner in respect of renting of immovable property alone. No such service tax would be recovered from respondents… in the meanwhile,” the High Court had said.

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