We are running a manufacturing unit at the land allotted by the SIPCOT Tamilnadu. We paid development charges/Upfront Charges and lease rent towards 99 years lease of SIPCOT land. Lease deed prior to the period 01-07-2012 .Now the SIPCOT is demanding us to pay the service tax for development charges / upfront charges.Should the company pay the same? Will this development charges attract service tax?
07 September 2016
In the case of Greater Noida Industrial Development Authority v. CCE & ST, Noida 2015 (038) STR 1062 – (Tri. New Delhi), it was held that upfront lease premium or salami paid by the lessee to the lessor for transfer of interest in the property from the lessor to the lessee cannot be taxed in terms of Section 65(105) (zzzz) of the Finance Act, 1994. In its final order, Principal Bench of CESTAT at New Delhi held that premium is price paid for obtaining lease of an immovable property while rent is payment made for use and occupation of immovable property leased. Tax is payable on renting of immovable property. Lease premium is not for continued enjoyment of property and as such demand was held to be not sustainable" Thus upfront charges in the nature of salami are not liable to service tax.
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