Can landlord ask service tax after 4/5 years

Queries 602 views 6 replies

Manoj Punjabi

Accountant

349 Points Joined November 2012

Sir

We have rented commercial property 5 years ago, we agreed in lease agreement that service tax will be payable by us. First agreement expired in 2013, agreement was renewed for 3 years again, Initially leasor's income was below 10 lacs & was not under service tax applicability, so he did not ask any service tax from us, we assumed service tax was not applicable to him in all the years, as he neither informed us about his service tax liability nor demanded any service tax in 5 years.

now suddenly he has sent us account for last 5 years asking for service tax for 5 years, which is considerably big amount.

We sent him request that as you did not inform us about this liability, so you absorb this service tax and from today onwards we will pay you service tax as you have informed us now.

In return he sent us legal notice that we are bound to pay him tax, either pay or lease agreement is cancelled and vacate the premises.

we have established our business with very hard work in all these years, do we have a chance to fight, can we deny the payment of service tax, as we think it is his fault that he did not inform us about this tax, paying monthly service tax in all those years gone by would have been easiser, but paying very big amount of service tax of last five years is unbearable, it will just break our back.

Even if we vacate the premises, can he legally win his argument or do we have chance to win this argument that he did not inform about this liability in all those years.

please guide.

Replies (6)

Rakesh

Executive

21 Points Joined August 2009

Confirm the status of registration of Service tax by landlord when he came under liability to pay tax means when his income crossed 10 lacs. During the period of exemption availed he cannot ask to pay the tax.

Rakesh jaiswal

Manoj Punjabi

Accountant

349 Points Joined November 2012

Thank you Mr. Rakesh for your response.

Landlord has come in to liability 4 and half years back, he has paid the tax partly and also sent us the paid challans, there is no doubt on this point.

But he did not inform us about this.

My query is can we fight on the premise that he did not inform us about this liability, which went on accumulating and became a very big amount due to his irresposibility. Now how can we pay such a big amount altogether. He should have immediately informed us as soon as the service tax became applicable to him, and we would have happily paid him the service tax on monthly basis along with rent, that would have been easier and that service tax we could have claimed as expense in our Income Tax returns, but now after five years paying this big amount is just unbearable.

Please guide us, what can we do on this point of his fault or call it his irresponsibilty to inform us about this liability and now his aggresiveness of sending legal notice that either pay or leave the premises. Is he right on this issue? can't we do anything? Can he legally recover this tax from us?

Manoj Punjabi

Accountant

349 Points Joined November 2012

Some one please guide

Prasad

Sr. Manager

617 Points Joined April 2011

Manoj has your owner sent invoices to you month on month

CA Umamaheswara Rao

Chartered Accountant

72 Points Joined July 2011

First refer your rental agreement, see whether rent is inclusive of all taxes or taxes should be payable seaparately.

If rent is inclusive of all taxes then you can orgue that the taxes are paid by you as it is inclusive of all taxes.

Second point is, did he charged service tax separately on rental invoice ?

When service tax is not shown separately in invoice, sums collected by the assessee should be regarded as cum-tax and service tax is to be determined by back calculations.

Conclusion: In my opinion when service tax is not shown separately in the rental invoice, the rent should be considered as inclusive of tax, then he has to pay service tax by determining through back calculations.