is service tax applicable on renting of immovable property?
This query is : Resolved
21 April 2009
is service tax applicable on renting of immovable property?
21 April 2009
Delhi high court struck down the levy of service tax on renting of immovable property as unconstitutional.
21 April 2009
In terms of taxable service yes,but yesterday there has been a ruling that it is unconstituional
News Letter
The DelhiHigh Court has on April 18, 2009 struck down the levy of service tax on renting of immovable property as "unconstitutional"
India, Republic of (Press Release) April 18, 2009 --
The Delhi High Court has today struck down the levy of service tax on renting of immovable property as "unconstitutional", while deciding 26 writ petitions of different petitioners, by a combined order. The division bench of the Delhi High Court comprised of Mr. Justice Badar Durrez Ahmed and Mr. Justice Rajiv Shakdher observed that service tax shall not be levied on renting of immovable property.
Alishan Naqvee, Advocate, LexCounsel Law Offices, who represented his clients in two of the petitions disposed off today, tells that the category of "renting of immovable property service" was introduced by the Finance Act of 2007. This, in effect brought renting, letting, leasing, licensing or other similar arrangements of immovable property for use in the course of furtherance of business and commerce, within the service tax net with effect from June 1, 2007. This new levy severely impacted business models across Indiaas most of the rent arrangements did not even stipulate it beforehand.
The businessesacross Indiaopted to en masse challenge the constitutionality of levy of service tax on rent, on the primary grounds that renting does not involve any service, and the Central Government is not empowered to tax consideration for transfer of rights in immovable property, being a state subject as per the Constitution of India. Few High Courts, including the High Court of Mumbai, Delhi, Gujarat, Andhra Pradesh, Kolkata and Chennai reportedly granted interim reliefs to the petitioners from payment of service tax until final disposal of their matters. The stays were however granted subject to undertakings by the petitioners, mainly tenants, to deposit the service tax amount with the Government if the tax was ultimately held constitutional. The Delhi High Court however is the first High Court to deliver the final order in the matter that would have persuasive value for the other High Courts.
source: FPR
The detailed order of the Delhi High Court is expected to be available within the next couple of working days. One issue that needs to be seen is whether the Delhi High Court has expressly limited the applicability of its judgment to its territorial jurisdiction. Notably, while granting interim orders, the Delhi High Court had expressed that the stays would be operative within the territorial jurisdiction of the Court. Consequently, a number of petitioners, having operations in multiple states, were constrained to knock at the doors of the other High Courts.
To avoid multiplicity of litigation, the Union of India preferred a transfer petition to the Supreme Court of India seeking transfer of all writ petitions pending before different High Courts of India, to the Delhi High Court for single window adjudication.
It is open for the Government to prefer an appeal before the Supreme Court of India, challenging the decision of the Delhi High Court. The judgment however delivers great relief to the business by helping liquidity in the current times.
News Letter
The DelhiHigh Court has on April 18, 2009 struck down the levy of service tax on renting of immovable property as "unconstitutional"
India, Republic of (Press Release) April 18, 2009 --
The Delhi High Court has today struck down the levy of service tax on renting of immovable property as "unconstitutional", while deciding 26 writ petitions of different petitioners, by a combined order. The division bench of the Delhi High Court comprised of Mr. Justice Badar Durrez Ahmed and Mr. Justice Rajiv Shakdher observed that service tax shall not be levied on renting of immovable property.
Alishan Naqvee, Advocate, LexCounsel Law Offices, who represented his clients in two of the petitions disposed off today, tells that the category of "renting of immovable property service" was introduced by the Finance Act of 2007. This, in effect brought renting, letting, leasing, licensing or other similar arrangements of immovable property for use in the course of furtherance of business and commerce, within the service tax net with effect from June 1, 2007. This new levy severely impacted business models across Indiaas most of the rent arrangements did not even stipulate it beforehand.
The businessesacross Indiaopted to en masse challenge the constitutionality of levy of service tax on rent, on the primary grounds that renting does not involve any service, and the Central Government is not empowered to tax consideration for transfer of rights in immovable property, being a state subject as per the Constitution of India. Few High Courts, including the High Court of Mumbai, Delhi, Gujarat, Andhra Pradesh, Kolkata and Chennai reportedly granted interim reliefs to the petitioners from payment of service tax until final disposal of their matters. The stays were however granted subject to undertakings by the petitioners, mainly tenants, to deposit the service tax amount with the Government if the tax was ultimately held constitutional. The Delhi High Court however is the first High Court to deliver the final order in the matter that would have persuasive value for the other High Courts.
source: FPR
The detailed order of the Delhi High Court is expected to be available within the next couple of working days. One issue that needs to be seen is whether the Delhi High Court has expressly limited the applicability of its judgment to its territorial jurisdiction. Notably, while granting interim orders, the Delhi High Court had expressed that the stays would be operative within the territorial jurisdiction of the Court. Consequently, a number of petitioners, having operations in multiple states, were constrained to knock at the doors of the other High Courts.
To avoid multiplicity of litigation, the Union of India preferred a transfer petition to the Supreme Court of India seeking transfer of all writ petitions pending before different High Courts of India, to the Delhi High Court for single window adjudication.
It is open for the Government to prefer an appeal before the Supreme Court of India, challenging the decision of the Delhi High Court. The judgment however delivers great relief to the business by helping liquidity in the current times.
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- Manual Rectification through AO
- IT Return filed defective u/s 139 (9)
- Defective Return - Tds on advance
- Fixed Deposit Claim Relinquishment by the Nominee
- TCS ON SOFTWARE SALES
- Not a CA , can we prepare balance sheet
- Income Type for interest from government bonds
- TDS RATE ON RENT PAID TO NRI
- GSTR-9 HSN Summary and Credit Note without item
- I WANT CLEAR DETAIL AND HOW TO ENTRY IN TALLY
- From 15CA for remittance by domestic travel agent by to Foreign Destination Management Company.
- Issue of gst e invoice
- Gstr 9 2023-24
- Interchangeable words in accounts
- Adjusted profit/Loss in the case of LLP and Pvt. Ltd.company
- How to adjusted advances given or receipt
- Foreign vendor without PAN unable to to register due to non receipt of OTP on foreign number ?
- 133(6) DIN INVALID format error - ->WHERE TO REPLY 133(6) notice?
- Query for dubts
- GST RCM not shown in GSTR-3B
Trending Online Classes
CAclubindia
