Renting Building to Run Hotel Not Taxable as “Renting of Immovable Property Service”: CESTAT rules in matter of Rajinikanth

The appellant, Shri R. Rajinikanth, challenged the orders passed by the Commissioner of Service Tax (Appeals), Chennai, which had upheld a demand for Service Tax. The Revenue contended that the activities carried out at the Mandapam (marriage hall) fell under the category of “Renting of Immovable Property” services.

The appellant argued that the transaction in question was not merely renting but involved providing a space for specific functions, which should be excluded from the ambit of the taxable service as per the legislative intent and judicial precedents.

Main Issue: Whether the services provided by the appellant through Raghavendra Mandapam are liable to Service Tax under the category of “Renting of Immovable Property” or if they fall outside the scope of the definition provided under Section 65(105)(zzzz) of the Finance Act, 1994.

CESTAT’s Ruling: The Customs, Excise & Service Tax Appellate Tribunal (CESTAT) ruled in favour of the appellant and set aside the impugned orders. The Bench observed that the definition of “renting of immovable property” specifically excludes buildings used for the purpose of accommodation, which includes hotels and similar establishments.

The Tribunal held that the legislative intent was not to tax immovable property used for such purposes. Since the transaction fell wholly outside the taxable service category, the Tribunal held the tax demand unsustainable and granted the appellant consequential relief as per law.

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