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2015 (8) TMI 1248 - CESTAT NEW DELHI

2015 (8) TMI 1248 - CESTAT NEW DELHI - 2016 (42) S.T.R. 91 (Tri. - Del.) - Renting of Immovable Property Service - Valuation - Inclusion of notional interest - Penalty u/s 77 - Held that:- Appellants have received a huge sum of Rs, 20 crores, interest free as security deposit at the time of execution of the agreement. The monthly rental fixed is so nominal in regard to the property that is leased. Again, the renewal terms of the agreement are that the agreement can be renewed up to 20 years. If .....

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gments rendered in K. Raheja Corp. (P) Ltd. [2015 (2) TMI 886 - CESTAT MUMBAI] and Murli Realtors Pvt. [2014 (9) TMI 461 - CESTAT MUMBAI] where the Tribunal has held that notional interest on interest free security deposit cannot be added to the rent agreed between the parties for the purpose of levy of service tax on renting of immovable property, is not applicable to the present case.

The facts of the instant case stands on a different footing for the reason that the security deposi .....

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lication for stay is filed by the appellants alongwith the appeal challenging the Order-in-Original dated 23.5.2013. The appellants are providing services of Renting of Immovable Property and are registered for payment of service tax for these services. The brief facts are that on 9.11.2005 the appellants who own industrial property entered into a Lease Agreement with M/s Granada Services Pvt. Ltd. to lease 2,00,000 Sq. Ft. industrial property in Noida in favour of Granada Services (P) Ltd. (GSP .....

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s became taxable. It is the case of Revenue that the rent payable per month fixed as per the agreement is not the sole consideration for the service of leasing/renting of immovable property. That the rent fixed has been influenced by the interest free security deposit taken by the appellant. That therefore the notional interest of the security deposit of 20 crores has to be added for proper valuation of the taxable service. Thus a show cause notice was issued proposing demand of service tax by f .....

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005 during which time the service of renting of immovable property was not a taxable service, the security deposit taken at the time of execution, would not come within the purview of levy of service tax. The Ld. Counsel referred to the definition of 'Lease' in Transfer of Property Act, 1882 and 'Renting' of Immovable Property' in Finance Act 1994. A Lease of immovable property is a transfer of a right to enjoy such property for consideration. According to him, lease is the t .....

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, when renting of immovable property was not a taxable service. Further, that the appellants have been discharging the service tax liability on monthly rentals received after the services became taxable. The learned Counsel vehemently contended that loading of notional interest on interest free security deposit is without any basis and the application of notional interest is unknown to service tax regime. That Section 67 of the Finance Act, 1994 does not speak about adding of notional interest. .....

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t. The appellants are thus assured of a handsome interest free capital for 5 years. The agreement can be renewed at interval of five years or such other, intervals up to a maximum period of 20 years. But it is specifically stipulated that the monthly rent shall not be revised or enhanced during the entire period of agreement, Adverting to these conditions the Ld. DR. urged that it is apparent that the monthly rent agreed is not the sole consideration for the lease. 4. After hearing the submissio .....

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received a huge sum of Rs, 20 crores, interest free as security deposit at the time of execution of the agreement. The monthly rental fixed is so nominal in regard to the property that is leased. Again, the renewal terms of the agreement are that the agreement can be renewed up to 20 years. If renewed to such extended period, the refund of the security deposit need to be made only after 20 years. But as to the rate of rent, it is specifically stated that the rent shall not be revised or enhance .....

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