Rent on Service Tax.
Querist :
Anonymous
(Querist) 22 March 2011
This query is : Resolved
Dear All
We remember that levy of service tax on ‘Rent’ was held ultra vires by Delhi High Court in case of Home Solution Retail India Ltd. Vs. UOI and others (2009) 20 STT 129. Union of India- who was the respondent in said judgment filed a SLP in Supreme Court, praying inter alia for stay of operation of Delhi High Court judgment. However, the Supreme Court did not stay the operation of Delhi High Court judgment, but issued notices to parties concerned to file their replies. During pendency of matter in Supreme Court, Revenue authorities instructed their field officers by way of Instructions dated 15thJuly 2009 to take necessary action to safeguard revenue by either pursuing the tax payer to pay up the service tax or resort to means under law. The Instructions issued on 15 July 2009 were challenged by SSIPL Retail Ltd. in a Writ petition filed before Delhi High Court who has taken strong objection to said Instructions and it was assured by Additional Solicitor General, appearing on behalf of the Union of India, that corrective steps will be taken to issue further instruction, in super session of earlier instructions, to not to demand service tax till such time Supreme Court decides the SLP.
We want one clarification that if it is applicable on the properties situated in other states.
Please resopond.
G. ARAVINTHAN
(Expert) 22 March 2011
Rent of service tax or Service Tax on Rent?
R.Ramachandran
(Expert) 22 March 2011
OK Agreed it is service tax on renting of immovable properties for commercial purposes.
Be that as it may, to over come the decision of the Delhi High Court in Home Solution Retail India Limited, changes have been brought in last year's budget amending the definition.
That amendment has once again been under challenge before the Delhi High Court. The matter was last heard very recently and would be heard again on 31.3.2011 and thereafter a final decision is expected.
In the meanwhile, P&H High Court has ruled that last year's budgement amendment in the definition is clarificatory in nature and upheld the levy of service tax on renting of immovable property for commercial purpose.
Thus, the decision of the Delhi High Court cannot be said to have universal application. At best, it can only have pursuasive value.
One can definitely expect the matter to reach the Supreme Court once the decision of the Delhi High Court comes out.
In the meanwhile, the business has to take a commercial call, as to whether to pay the service tax or to wait for the outcome of the decision.
