Leasing of Immovable Property Service against Re-Fundable LU
This query is : Resolved
12 March 2009
I have a doubt as how to calculate the service tax on the below issue.
We intend to leaseout our property for commercial purposes against a re-fundable deposit amount of rs.5.00 Crore.
I will not be getting any monthly rent out of the above deal.
The lease period would be for 5 years and at the expiry of the 5 years i will have to return the entire Rs.5.00 crore back to the clinet.
In the above, case how to arrive on the quantum of service tax payable
Pls clarify
Regards
Karthik
We intend to leaseout our property for commercial purposes against a re-fundable deposit amount of rs.5.00 Crore.
I will not be getting any monthly rent out of the above deal.
The lease period would be for 5 years and at the expiry of the 5 years i will have to return the entire Rs.5.00 crore back to the clinet.
In the above, case how to arrive on the quantum of service tax payable
Pls clarify
Regards
Karthik
05 April 2009
The subject amount will earn you interest on the deposit.
That is nothing but Taxable income received by you per month.
If the interest is credited to your account on Monthly basis then the amount stands to be realised by you and service tax becomes payable.
If the interest is credited to your account on annoual basis, then service tax becomes payable on 31st March when the interest is credited to your account.
If the above subject arrangement is not done at your end, then the department will pursue on the notional value, and will arrive at a value available for the same property in question, that would have been earned by you.
To avoid the ambiquity, either pay on the interest treating as income earned as rent, or evalaute the market value of the nearby available rates prevailing to discharge your service tax liability.
The above clarification is NOT provided as a legal opinion. Individual organizations are encouraged to seek professional consultancy from their respective lawyers
That is nothing but Taxable income received by you per month.
If the interest is credited to your account on Monthly basis then the amount stands to be realised by you and service tax becomes payable.
If the interest is credited to your account on annoual basis, then service tax becomes payable on 31st March when the interest is credited to your account.
If the above subject arrangement is not done at your end, then the department will pursue on the notional value, and will arrive at a value available for the same property in question, that would have been earned by you.
To avoid the ambiquity, either pay on the interest treating as income earned as rent, or evalaute the market value of the nearby available rates prevailing to discharge your service tax liability.
The above clarification is NOT provided as a legal opinion. Individual organizations are encouraged to seek professional consultancy from their respective lawyers
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