HC clears service tax on commercial outlets
In a judgment, which will rake in money into government coffers, the Delhi high court on Friday ruled that tenants of properties rented out for commercial purposes are liable to pay service tax.delhi Updated: Sep 23, 2011 23:21 IST
In a judgment, which will rake in money into government coffers, the Delhi high court on Friday ruled that tenants of properties rented out for commercial purposes are liable to pay service tax.
A three judge special bench headed by Chief Justice Dipak Misra held that renting immovable property itself can been regarded as a service by virtue of a recent amendment.
The court was hearing petitions filed by Home Solutions India Ltd and 200 other Delhi-based retailers against the levy.
They challenged section 65(105)(zzzz) of the Finance Act, 1994 in as much as it purports to levy service tax on the renting of immovable property to be used for commercial/business purposes. The Finance Act, 2010 had recently amended this provision with retrospective effect from June 1, 2007.
The court overruled the 2009 order of the court that concluded that renting immovable property for use in the course or furtherance of business of commerce by itself didn’t entail any value addition and, therefore could not be regarded as a service. The order means that all the 201 petitioners, who had taken commercial shops on rent, have to pay service tax with retrospective effect from 2007.
“Retrospective amendment is declared valid. There is value addition when premises are let out in course of furtherance of business,” ruled the court.
First Published: Sep 23, 2011 23:20 IST