Service Tax on Immovable Property
This query is : Resolved
13 March 2008
My Tenent ( a public limited Bank ) is refusing to PAY the service tax on rent of 210000 per month The tax was imposed by the government on 01.06.2007. Our lease was signed much before that i.e. on 21.04.06 . As the service tax did not exist at that time , there is no mention of the same in the lease deed.
What is the recourse that we have as landlords? Our rent amount never included any form of taxes except municipal taxes and property tax. How can we get this amount of 12.36% of rent from them ? Can we get the buiding vacated if they do not pay ??
Thanks,
Vinay K. ahuja
What is the recourse that we have as landlords? Our rent amount never included any form of taxes except municipal taxes and property tax. How can we get this amount of 12.36% of rent from them ? Can we get the buiding vacated if they do not pay ??
Thanks,
Vinay K. ahuja
13 March 2008
1
14 March 2008
Does your agreement contains any clauses relating to payment of statutory obligation?
14 March 2008
No. All it says that landlord will pay for all municipal taxes and property tax of present and future.
15 March 2008
You have to abide by the agreement, since the agreement is silent on the matter of taxes, you have no alternative but to bear the taxes
You cannot terminate the contract, unless the agreement is carrying such a clause of termination.
You can politely approach them to look into your constraint and negotiate for a partial remimbursement if not full amount, maybe you can take a 50%:50% call, but inspite of this if not paid, still your liability exist.
You may treat the present amount as inclusive of service tax, work backwords and pay the service tax to avoid interest and penalty clause, which otherwise will add to your cost.
Should you need further clarification feel free to write back
since the matter is clarified as of now treating the inquiry as closed.
You cannot terminate the contract, unless the agreement is carrying such a clause of termination.
You can politely approach them to look into your constraint and negotiate for a partial remimbursement if not full amount, maybe you can take a 50%:50% call, but inspite of this if not paid, still your liability exist.
You may treat the present amount as inclusive of service tax, work backwords and pay the service tax to avoid interest and penalty clause, which otherwise will add to your cost.
Should you need further clarification feel free to write back
since the matter is clarified as of now treating the inquiry as closed.
15 March 2008
You should convince the bank that the amount of service tax paid to you is availavle to them as credit and in fact it will not have any effect on their money flow but if not paid then it will be a cost to you, hence persuad them.
Further as per agreement, even if it was not mentioned at that time should not bar you from alternate remedy as you are not supposed to forsee/or imagine that in future any new tax (that too indirect tax) will be levied.
The agreement was made based on the facts as they were at that time, and if anything is done by the legislation which is not in your hands any time, you are not supposed to suffer for that.
Indirect taxes by its vary nature has to be borne by the ultimate consumer.
You must consult a lawyer on this sublect as the contract act provide for alternative remedy.
Further as per agreement, even if it was not mentioned at that time should not bar you from alternate remedy as you are not supposed to forsee/or imagine that in future any new tax (that too indirect tax) will be levied.
The agreement was made based on the facts as they were at that time, and if anything is done by the legislation which is not in your hands any time, you are not supposed to suffer for that.
Indirect taxes by its vary nature has to be borne by the ultimate consumer.
You must consult a lawyer on this sublect as the contract act provide for alternative remedy.
17 March 2008
Thanks for all your suggestions and help in the matter. Will taken legal help and follow it up with the bank.
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