Amount received for Renting of fit outs/movable properties would not fall under ‘Renting of immovable properties service’: CESTAT Quashes Service Tax Demand [Read Order]

The Chennai bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the amount received for renting fit-outs or movable properties would not fall under the category of renting immovable property services.  Khivraj Techpark Private Limited, the appellant assessee was engaged in providing renting of immovable property service and was registered with the Service Tax Commissionerate, and the assessee also discharged Service Tax for rent received as per the agreement for renting of the premises, they did not discharge Service Tax for the rent received as per the agreement for renting of the Fit Outs.

The assessee appealed against the order passed by the adjudicating authority for confirming the service tax demand along with interest and penalty.  Vamini J, the counsel for the assessee contended that the assessee at their own cost, had to fully furnish and provide the Fit Outs, utilities, equipment, etc., based on specifications provided and approved by the lessee; as the lease of Fit Out was a transaction like transfer of the right to use goods, the assessee had discharged Sales Tax and raised invoices with a value-added tax on the consideration received for renting out the Fit Outs.

Also submitted that these Fit Outs cannot be considered to be ‘immovable property’, the demand raised under “renting of immovable property service” cannot be sustained.  Satyanarayanan, the counsel for the department relied on the decisions made by the lower authorities and contended that the demand raised by the revenue was as per the law and liable to be sustained.

The Bench observed that in the case of Ascendas IT Park (Chennai) Ltd, the court held that the value-added tax and service tax being mutually exclusive, service tax cannot be demanded on the very same consideration received for renting movable properties. Since there are two separate agreements for renting of fit-outs and renting of premises, it can never be said that the amount received for renting of fit-outs/movable properties would fall under renting of immovable properties.  The two-member bench comprising Sulekha Beevi (Judicial) and Vasa Seshagiri Rao (Technical) quashed the demand raised by the revenue while allowing the appeal filed by the assessee.

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