TMI Blog2019 (12) TMI 645X X X X Extracts X X X X X X X X Extracts X X X X ..... etention of right to built-up space above and around the contracted property was incorporated in the agreement. It could, therefore, by no means be determined to be a sale agreement as commonly understood. Accordingly, the consideration is for the limited use of the property which squarely fall within the scope of section 65(105)(zzzz) of Finance Act, 1994. The decision in HOBBS BREWERS INDIA PVT. LTD. VERSUS UNION OF INDIA [ 2016 (4) TMI 1173 - TRIPURA HIGH COURT] has made it abundantly clear that the claim of the petitioner therein for restricting the taxability to rent, and not the premium, was dismissed thereby laying down the principle that premium is nothing but an advance rent , and, therefore, taxable which was adopted by the Tribunal in RIICO LTD., M/S RAJASTHAN STATE INDUSTRIAL DEVELOPMENT INVESTMENT CORPN. LTD. VERSUS CCE, JAIPUR-II [ 2017 (5) TMI 673 - CESTAT NEW DELHI] to hold that, though premium was also taxable, an exception was carved out for lease tenor exceeding 30 years arising from the specific provision incorporated through section 104 in Finance Act, 1994 - Admittedly, this provision does not apply to the present transaction. In the established ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ars on 14th August 2007, against lease rent of ₹ 100 per annum, for a consideration of ₹ 1,25,00,000, adjusted from the security deposit, and on payment of an additional ₹ 50,00,000. The demand of ₹ 21,63,012, as provider of renting of immovable property service between 1st July 2007 and 31st March 2009, was worked out on lease premium received and the lease receipts on which tax liability had not been discharged and on the finding that the transaction layered under misleading description for that very purpose. 2. With the conclusion that 20. It can be seen that the Noticee had received ₹ 175 lakhs on account of signing of a 999 years lease with M/s Movie Time. Whether any amount received on account of lease of 999 years would still be taxable under Renting of immovable property service would depend on whether leasing for such amount of years would still remain a lease and not be considered as a sale for all practical purposes as contended by the Noticee. It is seen that though the judicial pronouncements are yet to be made as on date on this issue in service tax, case laws do exist on the income tax and sales tax si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emium amount charged in respect of long term leases? 10.1 A lease is a transaction, which has to be supported by consideration. The consideration may be either premium or rent or both. The consideration which is paid periodically is called rent. As regards premium, the Apex Court in the case of Commissioner of Income Tax, Assam and Manipur v. Panbari Tea Co. Ltd. reported in (1965) 3 SCR 811 has made a distinction between premium and rent observing that when the interest of the lessor is parted with for a price, the price paid is premium or salami, but the periodical payments for continuous enjoyment are in the nature of rent, the former is a Capital Income and the latter is the revenue receipt. Thus, the premium is the price paid for obtaining the lease of an immovable property. While rent, on the other hand, is the payment made for use and occupation of the immovable property leased. Since taxing event under Section 65(105)(zzzz) read with Section 65(90a) is renting of immovable property, Service Tax would be leviable only on the element of rent i.e. the payments made for continuous enjoyment under lease which are in the nature of the rent irrespective of whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed in Income Tax Appeal No. 205 of 2010 decided on 12th July, 2010 is clearly distinguishable in the facts of the present case. The other judgments referred to by the learned counsel for the petitioner i.e. (1) CIT v. Panbari Tea Co. Ltd. (AIR 1965 SC 1871, (2) Smt. Shanti Sharma and Others v. Smt. Ved Prabha and Others [(1987) 4 SCC 193], (3) R.K. Palshikar (HUF) v. CIT [(1988) 3 SCC 594], (4) Maharaja Chintamani Saran Naty Sah Deo v. CIT (AIR 1961 SC 732), and (5) Associated Hotels of India Ltd. v. R.N. Kapoor (1959 AIR SC 12262) do not lay down anything contrary to what has been recorded by us herein above. 36. We may not enter into the issue as to whether premium paid along with rent fixed should form the total consideration for levy of Service Tax or not as no appeal has been filed by the Department against the order of the Tribunal. But at the same time if the Tribunal has held that only rent charged be considered for computation of Service Tax, it will not mean that the Tribunal has held that a part of the same transaction was taxable and part of it as not taxable. In our opinion, the Tribunal has rightly held that the lease of open land for use as commerci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of Hobbs Brewers India Pvt. Ltd. v. Union of India reported in [2016 (45) S.T.R. 60 (Tripura)] held as below: 4. We are not at all inclined to even issue notice in the writ petition. A perusal of Section 65(90a) and Section 65(105)(zzzz) of the Finance Act, 1994 as quoted in the letter dated 23-11-2015 clearly shows that Renting of Immovable Property Service includes renting, letting, leasing, licensing or other similar arrangements amounts to providing service and under Section 65(105)(zzzz) it is a taxable service. 5. It is urged on behalf of the petitioner that what is taxable is the rent and not premium. This argument is without any basis whatsoever. What is taxable is the consideration for the transfer. Even if premium is charged that is like charging of one time rent and then rebate is given for the yearly rent to be paid. Premium is also part of the lease money. Therefore, the entire transaction both premium and rent are amenable to Service Tax and Service Tax will have to be paid on the same. 6. Another submission has been made by Mr. Bhattacharji, that this premium includes capital investment. We do not understa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the sensitivity of land acquisition for such purpose, the design of transfer is contrived to ascertain substantive compliance with the conditions of such transfer before possession and ownership is completely handed over. The premium collected by these entities was the subject matter of dispute in the decisions cited and, though rendering guidance on principles, cannot be said to apply to the peculiarities of the impugned transaction. We shall revert to those after examining the present dispute. 6. The appellant herein had initially contracted with M/s Movie Time for the use of the theatre for conducting and, on exercise of option, purportedly, of purchase, transferred possession itself against annual lease rental and one-time premium components. This would, prima facie, bring the contractual agreement within the scope of the rentals considered by the Tribunal, and High Courts, in the decisions cited before us. Furthermore, as pointed out in the impugned order, the entire property, and its benefits thereof, had not been alienated by the appellant; the retention of right to built-up space above and around the contracted property was incorporated in the agreem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the Apex Court in the case of Commissioner of Income Tax, Assam and Manipur v. Panbari Tea Co. Ltd. reported in (1965) 3 SCR 811 has made a distinction between premium and rent observing that when the interest of the lessor is parted with for a price, the price paid is premium or salami, but the periodical payments for continuous enjoyment are in the nature of rent, the former is a Capital Income and the latter is the revenue receipt. Thus, the premium is the price paid for obtaining the lease of an immovable property. While rent, on the other hand, is the payment made for use and occupation of the immovable property leased. Since taxing event under Section 65(105)(zzzz) read with Section 65(90a) is renting of immovable property, Service Tax would be leviable only on the element of rent i.e. the payments made for continuous enjoyment under lease which are in the nature of the rent irrespective of whether this rent is collected periodically or in advance in lump sum. Service Tax under Section 65(105)(zzzz) read with Section 65(90a) cannot be charged on the premium or salami paid by the lessee to the lessor for transfer of interest in the property from the lessor to the lessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Artificially splitting up this single transaction into: (a) transfer of right of usage and (b) continued enjoyment of land, is totally uncalled for. There are no two transactions involved here. The land which is with the appellant is allotted to a lessee on a consideration. The consideration is paid in two ways, by a premium lump sum payment at the time of initial allotment and thereafter on a periodical basis; a lease rent is also paid. It is not tenable to hold that lump sum payment called premium or salami is towards sale of land and the periodical payment is towards lease rent of the land. Such interpretation will be self-contradictory as one cannot collect rent on a sold land. 7. The learned AR specifically contested the findings of the Tribunal in Greater Noida Industrial Development Authority (supra) as recorded in para 10.1 of the order. He submitted that having recorded that the consideration may be either premium or rent or both, for lease transaction, the Tribunal referred to the decision of Hon ble Supreme Court in Panbari Tea Company Ltd. - 1965 (3) SCR (811) to distinguish between premium and rent. It was recorded that the premium or salami is towar ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
