9911796707
TMI Blog2020 (9) TMI 354X X X X Extracts X X X X X X X X Extracts X X X X ..... 4th T Block, Jayanagar, Bengaluru(herein after referred to as Appellant) against the advance Ruling No. KAR/ADRG 17/2020 dated: 23rd March 2020 = 2020 (4) TMI 692 - AUTHORITY FOR ADVANCE RULING KARNATAKA. Brief Facts of the case: 1. Taghar Vasudeva Amrish (herein after referred to as "the Appellant") along with four others namely, Mrs. M. C. Nagarathna, Mr. T. V. Ambarish, Mr. T. V. Nagaraj & Mr. T.V. Anjan ("joint owners") have collectively leased out a multi-storied property constructed at site bearing no. 14, formed in converted Survey No. 68 (Old Survey No. 67), situated at Agugodi village, Begur Hobli, South Taluk, Banglore' to M/s DTwelve Spaces Pvt. Ltd. ("the lessee"). 2. The property which has been leased out by the Lessors comprises of a stilt floor (having two rooms) plus ground and four floors with each floor having 8 rooms. The Appellant is the sole and absolute owner of the stilt and ground floor in the building. The first, second, third and fourth floor of the said building is owned solely and absolutely by Mrs. M. C. Nagarathna, Mr. T. V. Ambarish, Mr. T. V. Nagaraj & Mr. T.V. Anjan respectively. 3. The Appellant along with the other four owners have jointly ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to that of hotel, inn, guest house, club site, etc. which is covered under different entry 6.2. They submitted that the following are the sine qua non in order to claim exemption under GST by virtue of Entry no. 13 of Notification No. 09/2017 - Integrated Tax (Rate) dated 28 June 2017 - a. It must be a service of renting; b. The property so let out must be a residential dwelling; and, c. Such residential dwelling must be given for use as a residence. 6.3 Regarding the first condition, they submitted that it is an undisputable fact that services of renting of immovable property have de facto been provided by Appellant to the Lessee covered under definition of Section 7 read with Entry No. 2(b) of Second Schedule of CGST Act, 2017 ("the Act"), as also recorded by Ld. AAR, Karnataka in Para 8(a) of Order dated 23 March 2020. 6.4. Regarding the other two conditions for claiming exemption, the Appellant submits the property let out by Appellant to the Lessee is 'residential' in nature and must be covered under the term 'Residential dwelling'; that definition of 'residential dwelling' has not been given under GST law. However, under erstwhile Service tax law, 'residential dwel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tedly been referred to as a residential property. 6.7. The Appellant further submitted that in order to be covered under the definition of `residential dwelling', another condition to be satisfied is that it must not fall into the meaning of hotel, motel, inn, guest house, camp-site, lodge, house boat, or like places which are meant for temporary stay. Applying the rule of noscitur a sociisto 'like places' used in definition of `residential dwelling', it can be said that this term is used for accommodation services, like hotel, motel, etc. only. Thus, they contended that if their property does not fall in any of the above, it shall also not fall within the meaning of 'like places'. 6.8. They submitted that the Lessee to whom residential accommodation has been leased out by Appellant has, de - novo, used it for running private hostel/paying guest accommodation, which is evident from the Trade License/permission sought from BBMP. Accordingly, it can be concluded without any iota of doubt that the Lessee is using such property for running Paying Guest Accommodation for ladies. 6.9. They also relied on the Explanatory Notes to the Scheme of Classification of Services released by CBI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nction between services provided by hotel, motel, inn, guest house, etc. and hostels/paying guest by classifying these two services under different SAC, i.e. 996311 and 99632 - Explanatory Notes to the Scheme of Classification of Services; ii. Based on the definitions of all these terms, it can be seen that these two are totally different in the nature of services provided by them. iii. Land zoning regulations of Bangalore also provides that a hotel cannot be operated in residential land zone whereas service apartments covering paying guest accommodation can be run therein; and, iv. Billing pattern of both the services, i.e. per day tariff as compared to monthly rent also substantiate the fact that the nature and duration of stay is different for these two services. 6.11. Regarding the third condition to qualify under exemption Entry No. 13 of Notification No. 09/2017 - Integrated Tax (Rate) dated 28 June 2017, i.e. such property must be used as a residence; the ultimate usage of the property rented out by Appellant in the hands of Lessee must be seen. They relied on the definition of residence as given by the Hon'ble Supreme Court of India in the matter of Bhagwan Dass and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ually for his living he stays at the place 'B'. Thende jure he can be said to be the resident of place 'A' but de facto he is the resident of the place 'B'." Further, they also relied on the Hon'ble Supreme Court decision in another matter of Jeewanti Pandey v. Kishan Chandra Pandey, reported in MANU/SC/0312/1981; (1982) 1 SCR 1003 wherein the Apex Court observed that: "In ordinary sense 'residence' is more or less of a permanent character. The expression 'resides' means to make an abode for a considerable time; to dwell permanently or for a length of time to have a fixed home or abode. Where there is such fixed home or such home at one place, his legal and actual residence is the same and cannot be said to reside at any other place where he had gone on a casual or temporary visit. But if he has not established home, his actual and physical habitation is the place where he actually or personally resides." 6.12. In view of above meaning of 'residence' as laid down by the Supreme Court, they contended that it can be concluded that - o Residence generally means where person resides for a considerable period of time; o It is an act or fact of abiding or dwelling in a place for so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t than in a rented flat fairly long." Further, the Court in the matter of Lakeside Resort Enter v. Board of Supervisors of Palmyra Township (20.07.2006 - 3rd Circuit), reported in MANU/FETC/0026/2006 concluded that a drug - and - alcohol - treatment center met the definition of "dwelling". 6.14. In view of the above, the Appellant submitted that the Lease Deed dated 21 June 2019 categorically specifies that the property rented out to Lessee can be used for sub-leasing to individuals (including students) for long - stay accommodation. Further, Registration Certificate of Establishment as obtained by the Lessee from Government of Karnataka bearing Registration No. 14/147/CE/0034/2020, also depicts that nature of business of the Lessee is that of Long Stay Accommodation. To substantiate that the minimum period for which accommodation is being given by Lessee to any student/individual is for 3 months, the student's data residing in such property, from the very beginning, was submitted by the Appellant. Accordingly, they submitted that if a person is staying at a place minimum 03 months, it can be sufficiently called as long-term accommodation or permanency as against the accommodatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lication for advance ruling on 23rd August 2019 online and since no order was passed or personal hearing was granted to the Appellant till December 2019, the Appellant approached the office of Ld. AAR, Karnataka, wherein they were requested to manually file a hard copy of the Application also. Accordingly, Appellant, immediately on 06 December 2019, submitted a manual copy of entire set of Application for which an acknowledgment was again given in the form of stamp. They submitted that if they had already filed an online application as per the provisions contained in statute and there is no provision or internal order of the Authority directing them to file a manual copy also, the date of filing the online application should be reckoned as the actual date of filing the application. Otherwise, the entire mechanism of filing an application online on common portal would be otiose as it is not serving any practical purpose, if date of filing or receipt of application has to be taken as date on which manual application is filed. Accordingly, they argued that the date of filing of application shall be taken as 23 August 2019 instead of 06 December 2019 and therefore, since the order has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Emphasis Supplied) They submitted that the Authority noted that the transaction of renting out of property is between 5 individuals who are joint owners of such property, and the Lessee and accordingly, ruled that the applicant is not providing any service in individual capacity to the Lessee directly. However, even after noting that no service has been affected by Appellant (then Applicant), Authority proceeded to pronounce a ruling holding the transaction of Applicant to be taxable. They submitted that the finding of the Authority is contradictory in itself where on one hand, it is ruled that Appellant is not effecting any supply and on other hand, such supply was held as taxable under GST. 6.18. In view of the above submissions, they prayed that the order of the lower Authority may be set aside as null and void ab initio since it has already been held by the Authority that . ......,Appellant is not effecting any supply of service to Lessee directly. PERSONAL HEARING 7. The appellant was called for a virtual hearing on 31st August 2020 which was conducted on the Webex platform following the guidelines issued by the CBIC vide Instruction F.No 390/Misc/3/2019-JC dated 21st Aug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d four floors has been constructed on site No. 14 admeasuring 2400 sq ft by Shri. T.A Vasudev who was the absolute owner of the said site. Shri. T.A Vasudev was permitted by BBMP vide Sanctioned Plan dated 27.05.2015 bearing Layout Plan bearing No Ad.com/SUT/1412/14-15 to construct a hostel building. Later, by a registered partition deed dated 04.08.2016, the ownership of the building was partitioned among five individuals viz. Shri. T.A Vasudev, Smt M.C Nagarathna, Shri. T.V Ambrish, Shri. T.V Nagaraj and Shri. T.V. Nagaraj, with each individual being the absolute owner of a specified floor of the building. In 2019, the five individuals who are owners of a specified floor of the building (individually referred to as Lessor 1, Lessor 2, Lessor 3, Lessor 4 and Lessor 5) have jointly executed a Lease Deed with M/s DTweleve Spaces Pvt Ltd (referred to as Lessee) whereby the Lessors have agreed to lease their portion of the building to the Lessee for the purpose of sub-lease/sub-licence to individuals (including students) for long-term accommodation. In consideration for the lease, the lessee has agreed to pay a monthly rent of an agreed upon amount and the lessee undertakes to deposit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or like places meant for temporary stay. In the case before us, we find from the records submitted by the Appellant that, the impugned property was constructed as Hostel building. The project description in the sanctioned plan submitted to us indicates that the plan is for the construction of a hostel building. Can a hostel building be called as a residential dwelling? A common understanding of a hostel is that of an establishment which provides inexpensive accommodation to specific categories of persons such as students, workers, travellers. On the other hand, a common understanding of the term "residential dwelling" is one where people reside treating it as a home. We find that the Appellant has constructed the building with the intention of providing hostel accommodation which is more akin to sociable accommodation rather than what is commonly understood as residential accommodation. Therefore, we conclude that the impugned property cannot be termed as "residential dwelling". Once the impugned property is not a residential dwelling, the exemption under Sl.No 13 of Notification No 09/2017-IT (Rate) dt 28.06.2017 will not apply to the renting/leasing of such property. 13. The App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 106 of the CGST Rules, 2017, the application for obtaining an advance ruling and filing an appeal against an advance ruling shall be made by the applicant on the common portal. However, due to the unavailability of the requisite forms on the common portal, a new Rule 107A has been inserted vide notification No. 55/2017-Central Tax, dated 15.11.2017, which states that in respect of any process or procedure prescribed in Chapter XII, any reference to electronic filing of an application, intimation, reply, declaration, statement or electronic issuance of a notice, order or certificate on the common portal shall, in respect of that process or procedure, include the manual filing of the said application, intimation, reply, declaration, statement or issuance of the said notice, order or certificate in such Forms as appended to the CGST Rules. Further Circular No 25/25/2017 GST dated 21.12.2017 clarified that an application for obtaining an advance ruling under sub-section (1) of section 97 of the CGST Act and the rules made there under, shall be made in quadruplicate, in FORM GST ARA-01. Although the application shall be filed manually till the advance ruling module is made available ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant has no locus standii in his individual capacity but is a part of the group of individuals who have leased the impugned property to the lessee Company. The Appellant has also made the application for advance ruling in his capacity as being a part of the group of individuals who have leased the impugned property. The question on which the ruling is sought for is also whether the exemption under SI.No 13 of Notf No 09/2017 IT (R) dt 28.06.2017 is applicable to the lessors (the Appellant and 4 others) as renting of residential dwelling for use as residence. We however expunge the following observation made by the lower Authority in Para 8(b) of the impugned order as it is beyond the ambit of the question on which the ruling has been sought: "It is suffice here only to rule that the question of charging or not charging GST for the transaction between the applicant and the Company does not arise as the applicant himself is not effecting any supply of service to the Company directly." Para 8(b) of the impugned order is modified accordingly. 17. In view of the above discussion, we pass the following order ORDER We uphold the Advance Ruling No KAR/ADRG 17/2020 dated 23-03-202 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
