Rajinikanth recently received a major relief Rs 56 lakh service tax suit, after the CESTAT set aside the demand for service tax by the tax department. The case was regarding the lease of a multistorey building, Raghavendra Mandapam, to Vasantha Bhavan Hotels India by Rajinikanth
Rajinikanth
Rajinikanth received a major relief after the Customs, Excise and Service Tax Appellate Tribunal in Chennai recently set aside a service tax demand against him. The CESTAT ruled that renting a building for use as a hotel is specifically excluded from the ambit of taxable services.
About the case
The case arose from a dispute over the lease of a multistorey building, Raghavendra Mandapam, to Vasantha Bhavan Hotels India Pvt. Ltd. by Rajinikanth. The revenue authorities had demanded service tax totalling approximately Rs 56.8 lakh for the period between June 2007 and June 2012. They argued that the property was used for commercial purposes, including a restaurant, banquet hall, and health club.
Authorities had issued a show cause notice demanding Rs 46.81 lakh for the period June 2007 to December 2011 and Rs 10.02 lakh for January to June 2012, along with interest and penalties under the Finance Act, 1994.
The revenue department contended that under Explanation 2 of the Finance Act, properties used partly for business and partly for other purposes should be deemed as commercial property.
Service tax demand against Rajinikanth set aside
A division bench comprising Technical Member M Ajit Kumar and Judicial Member Ajayan T V observed that the presence of facilities like restaurants and conference halls does not result in a bifurcation of the property's use. The tribunal noted that such facilities are integral and incidental to the activity of running a hotel and are intended to cater to the needs of guests.
However, the tribunal rejected this interpretation, stating that the premises continue to qualify as a building used by a hotel, which falls under a specific exclusion provided in Section 65(105)(zzzz) of the Act.
The bench relied on previous decisions by coordinate benches and the Supreme Court, which established that the legislative intent was not to tax immovable property used for hotels. Consequently, the tribunal found the impugned orders unsustainable and granted the appellant consequential relief, including the refund of pre-deposits made during the appeal process.
The bench held that buildings used as hotels are excluded from service tax under the Finance Act, 1994. Hence, it allowed the appeals filed by Rajinikanth while ruling that renting a building for use as a hotel does not attract service tax under the “renting of immovable property service” category when the premises are used for hotel accommodation.
(With inputs from PTI)
Subscribe today by clicking the link and stay updated with the latest news!" Click here!
