Service tax on Renting of Building for Hotel

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Renting of a building for a hotel, is not liable to Service
tax under ‘Renting of immovable property’ services Jai Mahal Hotels (P.) Ltd. Vs.
Commissioner of Central Excise, Jaipur [(2015) 53 taxmann.com 206 (New Delhi –
CESTAT)]


Jai Mahal Hotels (P.) Ltd. (the Appellant) entered into a
joint venture agreement dated August 28, 1985 with Indian Hotels Company
Limited (IHCL) for running hotel business at immovable property owned by the
Appellant. The Department contended that the Appellant had provided the taxable
service namely ‘Renting of immovable property’, defined in erstwhile Section
65(90a) read with Section 65(105)(zzzz) of the Finance Act, 1994 (the Finance
Act). Accordingly, demand of Service tax along with interest and penalty was
confirmed against the Appellant for the period from June, 2007 to March, 2010.
Being aggrieved, the Appellant filed an appeal before the
Hon’ble CESTAT, Delhi arguing that ‘hotel buildings’ were not covered under
taxable service in view of the exclusion clause under Section 65(105)(zzzz) of
the Finance Act and even otherwise, there was no provision of service, as there
was a joint venture.
The Hon’ble CESTAT, Delhi after analyzing exclusionary and
inclusionary clauses under Explanation I to the erstwhile Section 65(105)(zzzz)
of the Finance Act, held that as per Explanation 1(d) to erstwhile Section
65(105)(zzzz) of the Finance Act, ‘immovable property’ does not include
buildings used for purpose of accommodation, including hotels. Hence, buildings
used for, or as, hotels do not amount to immovable property. Therefore, renting
of a building for a hotel i.e. buildings used for purpose of accommodation
including hotels is covered by exclusion clause and does not fall within ambit
of taxable service namely ‘Renting of immovable property’.

The alternative argument of the Appellant as regards
joint-venture was not discussed and the matter was decided in favour of the
Appellant relying upon the provisions under Section 65(105)(zzzz) of the
Finance Act.
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