Vineet (Director) 30 October 2009

Cricular on Renting on Immovable Property Services

Foilowing is a Departmental Instruction dated 15-7-2009 on the subject matter not made public till 28-10-2009.

Subject: -

Judgement of Delhi High Court in respect of Service Tax on “Renting of immovable property”- Instruction – Regarding.
Kind attention is invited to the recent judgement of the Honourable High Court of Delhi in the matter of Home Solutions Retail India Ltd and Others

Vs Union of India, wherein it is held (Para 36 of the order) that, “Section 65(105)(zzzz) does not in terms entail that the renting out of immovable

property for use in the course of furtherance of business of commerce would by itself constitute a taxable service and be exigible to service tax….”

2. It is understood that , consequent to the said judgement of the Honourable High Court of Delhi, many assessees have stopped paying service

tax on the renting of immovable property for business or commerce.

3. In this regard, all the service tax formations are informed that the Department has filed an appeal against the said order of the Delhi High Court,

and the dispute has not reached finality. Given the situation, service tax formations throughout the country, are instructed to take necessary action

to safeguard revenue by either pursuing the tax payer to pay up the service tax due or resort to means under law to protect the revenue.

(Gautam Bhattacharya)

Joint Secretary (TRU)

Comments of learned friends are solicited.

F. No 336/10/2009 – TRU

Government of India

Ministry of Finance

Department of Revenue

Tax Research Unit

New Delhi

Dated: July 15, 2009

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7 Replies

Vineet (Director) 30 October 2009

Sorry, editing problem. Please read it as follows:

F. No 336/10/2009 – TRU

Government of India

Ministry of Finance

Department of Revenue

Tax Research Unit

New Delhi

Dated: July 15, 2009

Subject: -

Judgement of Delhi High Court in respect of Service Tax on “Renting of immovable property”- Instruction – Regarding.

Kind attention is invited to the recent judgement of the Honourable High Court of Delhi in the matter of Home Solutions Retail India Ltd and Others

Vs Union of India, wherein it is held (Para 36 of the order) that, “Section 65(105)(zzzz) does not in terms entail that the renting out of immovable property for use in the course of furtherance of business of commerce would by itself constitute a taxable service and be exigible to service tax….”

2. It is understood that , consequent to the said judgement of the Honourable High Court of Delhi, many assessees have stopped paying service tax on the renting of immovable property for business or commerce.

3. In this regard, all the service tax formations are informed that the department has filed an appeal against the said order of the Delhi High Court, and the dispute has not reached finality. Given the situation, service tax formations throughout the country, are instructed to take necessary action to safeguard revenue by either pursuing the tax payer to pay up the service tax due or resort to means under law to protect the revenue.

(Gautam Bhattacharya)

Joint Secretary (TRU)

A V Vishal (Advocate) 30 October 2009

Hi Vineet,

I have been suggesting the same to my clients, since the department has gone in appeal, it doesnot absolve the liability of the assessee until the Supreme court rules in favour of the assessee, if the ruling goes in favour of the assessee they can claim credit of the payment made until then the assessee has to pay the Service Tax.

Vineet (Director) 30 October 2009

Dear Mr Vishal

The biggest problem in the matter is that tanents are not ready to bear the service tax cost citing the Delhi High Court ruling. In such circumstances, why the landlord should be burdened.

Can the department enforce recovery of tax even if there is an standing court order against very validity of charge of tax.

A V Vishal (Advocate) 30 October 2009

Yes Vineet the department can enforce recovery since the order of the HC is held in abeyance till the SC passes orders in the appeal filed by the revenue.

Vineet (Director) 30 October 2009

Is it so? As far as I understand the decision of High Court is valid and effective until stayed or overruled by larger bench or superior court.

I agree that where executive orders have been issued for demand of tax (quasi-judicial orders), the recovery can be enforced despite the High Court order till a superior authority stays the recovery/ demand on the basis of such order. However, how the authorities can blatently defy the High Court Order which has so far not been stayed?

Dr.Anjani Kumar Vaidyasen,09431271130,Patna (Corporate affairs Taxation and Law Consultants Advocate) 01 November 2009

It is very clear that you have to pay the service tax after demand of the authorities(Service Tax Cell) otherwise you just wait for the final order of the apex court.

Sandeep Chilana (Tax Lawyer) 02 November 2009

Dear All,

Hon'ble supreme court while admitting the appeal filed by the Department has refused to stay the order passed by the Delhi High Court. Accordingly, the Delhi High Court's order remains effective and biding on authorities atleast falling under Del. HC hurisdiction.

Regards,

Sandeep