Decided on February 20,2015

Sri Venkateswara Developers Appellant
Commissioner Of S.T. Respondents


B.S.V.MURTHY - (1.) THE appellant is a partnership firm engaged in renting of immovable property to various customers.
(2.) The appellant got duly registered and was paying the Service Tax on the rents and maintenance charges collected from the tenants w.e.f. 1 -6 -2007. Taking a view that the appellant should have paid Service Tax on the amount collected by them under the head power charges payable to BESCOM and also towards expenses for maintenance of backup power generator and also taking note of the fact that power charges collected from the tenants were in excess of amount paid to the electricity board, proceedings were initiated against the appellant. As a result of the proceedings, demand for Service Tax of Rs. 2,47,18,037/ - with interest for the period from 2006 -07 to 2010 -11 has been confirmed and penalties under various sections of Finance Act, 1994 have been imposed. It was submitted by the learned CA on behalf of the appellants that the power charges paid to BESCOM is in the nature of reimbursements and not part of the rent and therefore, no Service Tax is payable. While admitting that there was a difference in the amount collected from the tenants and paid to BESCOM to the extent of Rs. 95,89,015/ -, he submits that the difference between the amount collected and paid to BESCOM is because power was generated from backup diesel generator. This is actually recovery of actual expenses towards providing backup generator power and the amount recovered is towards maintenance of generator, depreciation on the cost of generator and other costs which can be verified. It was also submitted that according to lease agreement, the appellant could collect power charges as per the actual consumption only and therefore, the amount collected is in the nature of reimbursement of expenses. We have considered the submissions made by both the sides. According to the provisions of Finance Act, 1994, only the actual expenses incurred on behalf of service receiver and paid can only be reduced. In such cases, it is considered that the appellant is acting as pure agent. Needless to say as regards BESCOM, charges actually paid to the BESCOM can be said to be in the nature of pure agent since BESCOM charges are required to be paid by the individual flat/space owners. At this stage, therefore, in the absence of any evidence to show that there were no separate lease agreements for each tenant, at this stage, the claim of the appellant that they acted as pure agent on a prima facie basis has to be accepted. However, as regards the difference of Rs. 95,89,015/ -, according to the appellants, this is collected towards generator power by the appellants themselves. This is a facility provided by the leaser to the tenants and there are two ways of collecting the amount. One way would be treating average expenses as part of the rent. The other was would be recovering the expenses on the basis of a calculation. Other than submitting that it can be shown by them that the actual expenses incurred on power generator, depreciation, etc., is less than what has been recovered, no evidence has been produced. This expenditure cannot be considered as expenditure incurred on behalf of the tenant and paid to someone else and therefore, appellant has acted as a pure agent cannot also be a view. In such a situation, it can be said that appellant has not made out a prima facie case in respect of the amount collected on this account of Rs. 95,89,015/ - (as per the written submissions). Therefore, appellant has to be put to some terms to pay tax on this amount. In view of the above observation, the appellant is directed to deposit an amount of Rs. 15 lakhs (Rupees fifteen lakhs only) within eight weeks from the date of receipt of this order and report compliance on 27 -4 -2015. Subject to compliance with the above requirement, the requirement of pre -deposit of balance dues is waived and recovery thereof is stayed during the pendency of appeal. (Pronounced on 20 -2 -2015);

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