IMMOVABLE PROPERTY/PART USED UNDER EXEMPTED SERVICE/LEASED/

This query is : Resolved

Arun (Querist)
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06 February 2009 Sir, I want to draw your kind attention to the following facts. Please take time to reply me. I will be highly obliged if you are kind enough to reply me.
My problem:
1. I am a tenant running a boarding house in a shopping complex wide Registered Lease Deed dtd 1.10.2005.
2.My yearly rentals is above 10 Lakhs.
3. The said complex has many banks and Our Hotel.
4. Section 65(105)(zzzz) exempts the Service tax for Residential and Hotel purposes.
5.The partly used Commercial complex deemed to be liable for Service Taxes as read:According to the explanation 2 to section 65(105) (zzzz), it has been clarified that if an immovable property is partly used in the course or furtherance of business/commerce and partly for residential or any other purpose, then it shall be considered as an immovable property for use in the course of furtherance of business or commerce.
6.Now the Landlord had issued a notice claiming arrears of service taxes from 1.6.2007 to till date.
7. The Registered Lease deed executed under contracts act does not specifically speak about the Service tax payments.
8. link This link says..The service provider has to pay from his own pocket if the Lease Deed doesnt speak specifically about payments of Service Tax.The article is written by Dinesh Kumar Agrawal, Grad. CWA, ACA
(Former Assistant Commissioner of Excise and Customs).
9.Please suggest me..a) am i liable to the so called claimed arrears? Please help me. Thanks in advance

K V Subba Rao

K V Subba Rao (Expert)
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06 February 2009 There are two Issues involved in Query. First one relates to Service Tax liability and second one relates to settlement with Landlord

FIRST ISSUE:I have checked
https://www.caclubindia.com/articles/article_list_detil.asp?article_id=1556 and read Article. It appears to me that Service Tax becomes payable according to the explanation 2 to section 65(105) (zzzz) quoted in the Query itself.

SECOND ISSUE: As per academic qualifications and offcial status, Sri Dinesh Kumar is definitely knowledgeable. But quotation from his Article "The service provider has to pay from his own pocket if the Lease Deed doesnt speak specifically about payments of Service Tax" can be relied upon only after knowing the background or context in which he made such Observation.

I am a novice to Service Tax subject; yet according to my information and knowledge, second Issue is governed by Contract Act or such other similar Act but not Finance Act (Service Tax).

As per Service Tax law--

When Service Tax becomes payable, Service Provider has compulsorily to pay irrespective of whether he could collect it from Service Receiver or not

When Service Provider does not collect Service Tax seperately, amount received by him is to be treated as Gross Amount and back working (12.36*100/112.36)has to be done for making payment

With regard to whether Owner has to bear the expenditure or collect it from Tenant depends on Terms & Conditions and strengths and weaknesses of Owner and Tenant on various points not related to Service Tax Law