Subletting of rented property free of charge

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CASourav Agarwal (Querist)
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08 September 2012 A proprietorship concern enters into a rent agreement & rents a space to be used as showroom for commercial purpose.Instead of using the property itself , the proprietor allows the sister concern which is a pvt co. to use the space for carrying on commercial activity. the co.uses the property for carrying on business for free ie, no sublet agreement has been entered into & no rent is charged by the proprietorship from the company. My query relates to Validity of the transaction.
1) Is it a valid Transaction?
2) Will this transaction entail any tax implication as in tax implication of this transaction in terms of service tax?
please throw some light on the issues related to this transaction.
thanks in advance.

CA Suresh Jain

CA Suresh Jain (Expert)
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08 September 2012 1. The Transaction is a valid transaction so far Service Tax Law is concerned,
2. The transaction is not all a service as per the definition of the word "Service" under section 65B(44. According to the definition the consideration for provision of service is must and in your case consideration is not at all there.

I agree with Mr. Laxman ishwarrao. Except to the extent as under :-

1. In this case the goods are rendered (I presume) unfit for use or damaged during the course of manufacture. The rejections etc are normal incidents during the process of manufacture. Since goods are being cleared as scrap central excise duty is payable. Remission is not applicable - refer 2007 (209) E.L.T. 477 (Tri. - Del.)

For further clarification please mail the query at sureshjain.nj@gmail.com and pay if you please Rs. 100 to 500 donation to the "KADAM" institute engaged in education to children of construction labours.
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