26 May 2010
Ours is a Pvt Ltd Co. We had taken office premises on rent. We had stopped payment of Service Tax on Office Rent wef 01.05.2009. Now the landlord has sent letter asking for the Service Tax on Rent @ 10.3% on rent from May,2009, stating that Govt has placed an ammendment in Parliament which further go on to state that no further suit/action would lie in any court in respect of this levy.
Whether we are liable to pay Service Tax to the landlord on the basis of this ammendment in Parliament or shall Delhi High Court judgement striking down the Service Tax on Rent still hold good ?
26 May 2010
The recent case law says: Between Home Solution Retail India Ltd and Others vs. Union of India and others wherein it is held that mere renting of immovable property for furtherance of business or commerce by itself cannot be regarded as a taxable service and held that not eligible to charge service tax in terms of the Section 65 (105) (zzzz) of Finance Act, 1994.
Why?
Levy of Service tax on renting of Immovable Property amounts to levy of tax on land/ buildings where in The Central Government does not have the right to levy tax on land / buildings as the same falls within the State List (List II 49) of the Constitution of India.
The transaction of renting of immovable property by itself is not taxable in terms of Section 65 (105) (zzzz) of the Finance Act
Hon'ble SC has said: Prima facie, as decided by the Hon’ble Delhi High Court, it seems that mere renting of immovable property by itself cannot be regarded as a service but if there is some other service provided in relation to renting of immovable property then such other service would be covered by Section 65 (105) (zzzz) of the Finance Act, 1994.
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