[2014] 44 taxmann.com 287 (New Delhi – CESTAT)- New Okhla Industrial Development Authority vs. CCE&ST.

Facts:
The Appellant, a statutory Development Authority, created by the provisions of the U.P. Industrial Area Development Act, 1976 had entered into long-term leases with third parties whereunder vacant lands were leased to such third parties, inter alia, for business or commercial purposes on long-term leases (of 99 years duration). The Appellant’s contention was that a long-term lease would not amount to renting of immovable property as such leases are substantially in the nature of transfer of ownership and consideration received on such transfers would not amount to consideration received for providing the taxable service enumerated in section 65(105)(zzzz).

Held:
Tribunal disagreeing with the argument of the Appellant held that, provision of section 65(105)(zzzz) neither marks nor accommodates any distinction between long-term and short-term leases. On a true and fair construction of this provision, it is clear that a service provided in relation to renting of immovable property for use in the course of or in furtherance of business or commerce is the taxable service. The provision does not restrict the ambit of the taxable service to only short-term leases nor identifies or classifies leases in terms of the duration. Tribunal further held that, in the absence of any restrictive signification in section 65(105)(zzzz), of a legislative intent to exclude long-term leases of immovable property from the purview of the taxable service defined and enumerated in the said provision, there is no authority to hold that long-term leases (so-called) are outside the purview of the taxable service-“renting of immovable property”. While coming to this conclusion, Tribunal also observed that what is a long-term and what is a short-term lease cannot be an open-ended, ambiguous and inchoate concept and that no authority, statutory or otherwise brought to the attention of the Tribunal which would provide a guidance to classify leases into long-term and short-term so far as section 65(105)(zzzz) is concerned.

b) Whether introduction of clause (v) in Explanation 1 to section 65(105)(zzzz) w.e.f. 01-07-2010 is prospective in nature? Held, Yes.

Held:
Tribunal held that, normally an inclusionary clause does not limit the plenitude of an enacting provision couched in broad terms. Thus the illustrations of what are “immovable property”, set out in the inclusionary clause in Explanation 1 would not derogate from “vacant land” being comprehended within the expression “renting of immovable property”. However, clause (zzzz) has an exclusionary clause as well, enumerating the subjects excluded from the ambit of “immovable property”. On a true and fair construction of the exclusionary clause, the legislative intent is compelling that vacant land whether having facilities clearly incidental to its use as such or otherwise does not constitute immovable property. As a consequence of the interplay between the enumeration of renting of immovable property as the taxable event read with the inclusionary and exclusionary clauses (in particular subclause (b) of the exclusionary clause) in section 65(105) (zzzz), renting of vacant land was clearly outside the purview of the taxable service, prior to 01-07-2010.
Tribunal also relied upon Clause 75 of the Finance Bill 2010. The Board Circular No. No.334/20I0-TRU, dated 26/02/2010 (in paragraph 3) and statement of objects and reasons accompanying the Finance Bill, 2010 to hold that, transactions covered by this sub-clause (v) of the Explanation have only the prospective operation.