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TMI Blog2023 (6) TMI 414X X X X Extracts X X X X X X X X Extracts X X X X ..... "A sum calculated as 20% (Twenty percent) of the "GROSS ROOM Income" and all other income except Food & Beverage Income and 15% (Fifteen Percent) on the Food & Beverage Income derived from the said hotel, shall be payable as per License Fee to the 'LICENCER' on or before the tenth of the succeeding month, along with a statement showing particulars of the payment, and it shall be called MONTHLY LICENCE FEE. Service Tax or any other Tax leviable now or in the future on the License Fee shall be deemed to be part of the above said fee percentages. The Room Income, Food & Beverage Income and other Income derived from the hotel shall be called Gross Turn Over of the Hotel" 2. The Department then requested the appellant to furnish details regarding the receipts of License fee from GRT. The appellant did not furnish the details. Later, the Range Superintendent requested GRT to furnish the details of License fee paid to appellant. GRT vide their letter dated 04.04.2011 furnished the details. It appeared to the Department that the license fee is nothing but rent paid by GRT to the appellant towards renting of the appellant's premises of M/s. Peninsula Hotels (P) Ltd. The activity was taxa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use in the course of or, for furtherance of business or commerce. Explanation 1. - For the purposes of this sub-clause, "immovable property" includes - (i) building and part of a building, and the land appurtenant thereto; (ii) land incidental to the use of such building or part of a building; (iii) the common or shared areas and facilities relating thereto; and (iv) in case of a building located in a complex or an industrial estate, all common areas and facilities relating thereto, within such complex or estate, (v) Vacant land, given on lease or licence for construction of building or temporary structure at a later stage to be used for furtherance of business or commerce but does not include- (a) vacant land solely used for agriculture, aquaculture, farming, forestry, animal husbandry, mining purposes; (b) vacant land, whether or not having facilities clearly incidental to the use of such vacant land; (c) land used for educational, sports, circus, entertainment and parking purposes; and (d) building used solely for residential purposes and buildings used for the purposes of accommodation, including hotels, hostels, boarding house, holiday accommodation, tents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 65 and submitted that 'Renting of Immovable Property' includes renting, letting, leasing, licensing or other similar arrangements of immovable property. The definition includes arrangements of different types that are in nature of renting, letting, leasing and licensing. The appellant has entered into a license deed to permit GRT to operate and run the Hotel. Therefore, the said arrangement would fall within the definition of Renting of Immovable Property even though license fee is fixed on profit basis. The argument of the learned counsel that Renting of Hotels is excluded from the purview of definition was countered by the learned AR, by submitting that apart from providing room accommodation services, the Hotel is providing various other services. As per the explanation, even if it is partly used for residential or accommodation purposes when part of the building is used for other services, it is deemed to be used for the furtherance of business or commerce and would be covered by the definition. The appellant has received license fee as stated in the agreement for renting of the immovable property which is the Hotel. Hence the demand confirmed is legal and proper. The learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant by GRT. A sum calculated as 20% of the 'Gross Room Income' and all other income, except food and beverage income and 15% on the food and beverage income derived from the hotel has to be paid on a monthly basis. It is also stated that room income, food or beverage income and other income derived shall be called as 'Gross Turnover of the Hotel'. It is thus sharing of profit of the business of the hotel and not a consideration paid for renting of the Hotel Building. If the business is at a loss or suppose the hotel has to be closed down (for eg., in a situation like lockdown during COVID-19) there may not be any income for the hotel. The appellant then does not get any consideration. Whereas in a situation of renting of immovable property, the consideration is for the service of providing renting of immovable property. In other words, the rent is paid all along when the transfer of right in the immovable property is active and alive. 16. Similar arrangement of licence granted to operate and run a Hotel was considered by the Tribunal in the case of Grand Royale Enterprises Ltd. Vs. Commissioner of Service Tax, Chennai-I 2019 (31) G.S.T.L. 453 (Tri. - Chennai). The Tribunal h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeared to the department that appellant has rented out the immovable property for conducting hotel and other related business for furtherance of business or commerce against license fee, hence the appellants are liable for payment of service tax under "Renting of Immovable Property Service" w.e.f. 1-6-2007. Accordingly, proceedings were initiated by issue of a SCN dated 17-3-2014 wherein inter alia, service tax liability of Rs. 3,21,94,224/- under the category of Renting of Immovable Property Service for the period 2009-10, 2011-12 and 2012-13 was proposed to be demanded with interest thereon. SCN also proposed imposition of penalties under Sections 76, 77 & 78 of the Finance Act, 1994. In adjudication, the Commissioner vide impugned order dated 9-3-2015 confirmed demand of Rs. 2,51,85,330/- with interest thereon, imposed equal penalty under Section 78 ibid and also imposed penalty under Section 77(1) and 77(2) ibid. Aggrieved the appellants are before this forum. 2. Today when the matter came up for hearing, on behalf of the appellant, Shri Sachin Chitnis, Ld. Advocate made oral and written submissions which can be broadly summarized as under :- (i) In the definition of "Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... milarly. (v) As an alternative plea, the proceedings per se are hit by limitation. In response to a letter dated 9-11-2005 issued by the Superintendent, SIV Chennai, the erstwhile owners SHIL vide their letter dated 15-12-2005 had given the information sought and also attached balance sheets for the years 2003-04 and 2005-06. Vide a further letter dated 26-6-2006, the Superintendent (SIV), Chennai requested for copies of the license agreement dated 20-3-1984 entered into between SHIL and IHCL, details of license fee received from IHCL during the years 2003-04, 2004-05 and 2005-06, details of service charges received for the same period and details of payment made to holding company namely Spencer & Co. All these required details were submitted by letter of SHIL dated 26-6-2006. Although all the information had been submitted, the SCN was issued only on 17-3-2014 for the period 2009-10 to 2012-13. Based on the same agreement dt. 27-6-1984 between SHIL and IHCL and subsequent agreement dated 18/2010 entered into between SHIL and the appellant hence the entire proceedings are hit by limitation. (vi) The present case involves interpretation of provisions and further appellant had p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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