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Electricity expense’ collected separately as reimbursement not included in consideration for ‘Renting of immovable property’ : CESTAT

Electricity expense’ collected separately as reimbursement not included in consideration for ‘Renting of immovable property’ : CESTAT

Fact: M/s. Kiran Gems Pvt. Ltd. (“the assessee”) was engaged in providing taxable services under the category of ‘Renting or immovable property service’ for which they were registered and discharged service tax on such services. In the Course of Audit, Revenue noticed that the assessee had recovered reimbursement charges of Rs. 6,44,88,765/- from the customers towards electricity charges in addition to the rent amount and therefore demanded service tax of Rs. 88,02,613/- along with interest and penalty.

Applicant’s Interpretation of Law: The assessee contended that the electricity charge reimbursed by the customer is not part and parcel of gross value of service of renting of immovable property as electricity charges were supposed to be borne by the tenant as per the terms of lease agreement.

Held: The Hon’ble CESTAT in the case “M/s. Kiran Gems Pvt. Ltd. vs. CCE & ST - Surat-I” stated that against renting of immovable property the only rent collect by the assessee from their customers was the consideration towards the rent whereas the electricity was consumed by the service recipient therefore, the recipient were liable to pay the same actual unless the same was included in the rent. Accordingly, the order was set aside and assessee’s appeal was allowed.

 

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