No Service Tax on Renting if premises used for hotel, hostel, accomodation etc.

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From: Rebecca Andrews <rebecca.andrews88@yahoo.in>
Date: Wed, Jul 4, 2012 at 7:46 PM
Subject: Message from EGroup of SolapurCAs No Service Tax on Renting if premises used for hotel, hostel, accomodation etc.
To: ca.shreehari@yahoo.com

 

2012  (6)  TMI  490  (Tri)                                                                                       M/s PARADISE MEHAK PROPERTIES PVT LTD Versus COMMISSIONER OF CENTRAL EXCISE, JAIPUR-I                                                          Service of renting of immovable property - demand of service tax - Held that:- Considering the definition of immovable property, the same does not include building used solely for residential purposes and building used for the purpose of accommodation including hotels, hostels, boarding houses, holidays accommodation, tents, camping facility etc.- in favour of assessee.                                                                          No. - 1618 of 2011                               Order No. -   ST/S/446/2012-CUS                     Dated - April 13, 2012                                         Archana Wadhwa, Mathew John, JJ. For Appellant: Shri B L Narasimhan, Adv. For Respondent: Shri K K Jaiswal, DR Per: Archana Wadhwa: Service Tax of  Rs. 19,50,612/- stands confirmed against the applicant for the period June, 2007 to June, 2008 on the ground that they have rendered the taxable service of renting of immovable property to Royal Orchid Banjara Pvt. Ltd. and as such are required to pay the Service Tax. 2. The appellant took a categorical stand before the lower authorities that in terms of definition of immovable property, the same does not include building used solely for residential purposes and building used for the purpose of accommodation including hotels, hostels, boarding houses, holidays accommodation, tents, camping facility etc. 3. While dealing with the above submission of the advocate Commissioner (Appeals) has observed as under: "24.......The appellant had contested that hotels are exempted from payment of tax under the said category, I find that the appellant has rented out / lease of the land along with the entire building, swimming pool and restaurant, bar, parking etc. with all the facilities as provided in the base building and the amentias and facilities under an agreement on monthly rental basis and a hotel is being run in the said building by M/s. Royal Orchid Banjara Pvt. Ltd. The said building is admittedly not for accommodation purpose of the lessee. The building provided by the appellant is being used by M/s. Royal Orchid Banjara Pvt. Ltd. to run the hotel business which is commercial in nature. The building premises provided by the appellant on rental basis, is not used as residence by the lessee himself. The exemption under the explanation 1 (d) of the Section 65 (105) (zzzz) of the Finance Act, 1994, is available to the hotels, hostels etc. who provides rooms on rent to their clients and not in respect of immovable property which is rented out to run the hotel business which is without any doubt a commercial activity and is not governed by the exclusion clause (d) of the Explanation-1 to Section 65 (105) (zzzz) of the Act." 4. In this regard we find that commissioner(A) held in above para that the exemption is available to the hotels, hostels etc. who provides rooms on rent to their clients and not in respect of immovable property (building) which is rented out by a person to another person to run the hotel business, therefore, the argument advanced by the appellant has no force. 5. We do not find any force in the above reasoning adopted by the Commissioner (Appeals). The explanation-I to the entry is to the clear effect that for the purpose of said clause, immovable property does not include the following: "(d) building used solely for residential purposes and buildings used for the purpose of accommodation including hotels, hostels, boarding houses, holiday accommodations, tents, camping facilities." 6. In view of the above, we are of the opinion that the appellant had good prima facie case in its favour so as to allow the stay petition unconditionally. (Pronounced in the open court)

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