The Ahmedabad bench of CESTAT has in the matter of Gujarat Power Corporation Ltd. v C.C.E. & ST (Service Tax Appeal No. 10193 of 2017) dated November 18, 2022, held that the service tax is not to be charged on the one time premium or salami paid . The tribunal has taken reference to the judgement of Greater Noida Industrial Development Authority 2015 (38) STR 1062 and the Apex Court judgement in the case of Commissioner of Income Tax, Assam and Manipur v. Panbari Tea Co. Ltd. reported in (1965) 3 SCR 811.
Some relevant part of the judgement is : “ the premium is the price paid for obtaining the lease of an immovable property. While rent, on the other hand, is the payment made for use and occupation of the immovable property leased. Since taxing event under Section 65(105)(zzzz) read with Section 65(90a) is renting of immovable property, Service Tax would be leviable only on the element of rent i.e. the payments made for continuous enjoyment under lease which are in the nature of the rent irrespective of whether this rent is collected periodically or in advance in lump sum. Service Tax under Section 65(105)(zzzz) read with Section 65(90a) cannot be charged on the “premium” or ‘salami’ paid by the lessee to the lessor for transfer of interest in the property from the lessor to the lessee as this amount is not for continued enjoyment of the property leased. Since the levy of Service Tax is on renting of immovable property, not on transfer of interest in property from lessor to lessee, Service Tax would be chargeable only on the rent whether it is charged periodically or at a time in advance.”
The judgement can be accessed at :
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