SC continues stay on HC order on commercial rent service tax


The Supreme Court today maintained its stay on a Delhi High Court order that sought to restrain the Centre from recovering service tax on renting property for commercial use.

A bench comprising Justices Mukundakam Sharma and A R Dave said that the apex court''s interim order of January 13 will continue till further orders.
The bench said the order would continue till the High Court takes a final decision on the matter.

The direction follows the centre''s plea, challenging the interim order passed by the Delhi High Court on May 18, 2010.



The court had allowed the appeal of around 20 firms, including Home Solutions Retail, and stayed the amendments made by the government in the Budget 2010-11.

In the Finance Act, 2010, the government had amended the taxing entry of "Renting of Immovable Property service", retrospective from June 1, 2007.

The High Court had observed that its earlier order, passed on April 18, 2009, had held that renting of real estate cannot be regarded as a service.

It had observed that renting of any immovable property by itself did not entail any value addition, and therefore, cannot be regarded as a service.

"Prima facie, it appears that renting of immovable property itself has been regarded as a service by virtue of the recent amendment even though this Court by virtue of the said decision on April 18, 2009 had categorically concluded that renting of immovable property by itself cannot be regarded as a service," the Delhi High Court had said while staying the recovery.

"In the meanwhile, there shall be no recovery of Service tax from the petitioner in respect of renting of immovable property alone. No such service tax would be recovered from respondents 5-10 in the meanwhile," it said.