The Delhi bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has ruled that the service tax can be levied on long-term lease of commercial properties and shops for 99 years.
In the instant case, the assessee, Rajasthan Housing Board has constructed shops which were leased to successful bidders in the auction process for a period of 99 years and various amounts were recovered. The Department was of the view that the amounts recovered as lease charges were liable to payment of service tax under the category of “Renting of Immovable Property Service” falling under Section 65(90a) read with Section 65(105)(zzzz) of the Finance Act, 1994.
On behalf of the appellants, it was contended that the lease rent has been charged from various shops, which have been granted lease for 99 years. The ownership/ title in such property and transferred to the buyer and such transactions are subject to levy of stamp duty. It was, therefore, contended that no service tax is payable since 99 years lease partakes the character of sale.
The first appellate authority confirmed the demand.
The bench noticed that in the case of Greater Noida Industrial Development Authority vs. CCE&ST, Noida, the Tribunal affirmed the imposition of service tax by finding that the long term lease of 99 years will be covered within the definition of “Renting of Immovable Property.”
“The above decision of the Tribunal was affirmed by the Hon’ble Allahabad High Court, reported as 2015 (40) STR 95 (All.). In the above case, the Tribunal has examined the leviability of service tax on long term lease of vacant land but we are of the view that the finding is equally applicable to the present case,” the bench said.
Following the above decision, the bench held that RHB will be liable for payment of service tax on the lease amounts recovered by them from the allottee of commercial properties.
Subscribe Taxscan Premium to view the Judgment
