Chennai, March 4 The Customs, Excise and Service Tax Appellate Tribunal in Chennai overturned a service tax demand against actor Rajinikanth on Wednesday, ruling that renting a building for use as a hotel is specifically excluded from the scope of taxable services.
The case arose from a dispute over the lease of a multi-story building, Raghavendra Mandapam, to Vasantha Bhavan Hotels India Pvt. Ltd.
Revenue authorities had demanded service tax amounting to approximately Rs 56.8 lakh for the period between June 2007 and June 2012, arguing that the property was used for commercial purposes, including a restaurant, banquet hall, and health club.
A division bench comprising Technical Member M Ajit Kumar and Judicial Member Ajayan T V observed that the presence of facilities like restaurants and conference halls does not result in a bifurcation of the property's use.
The tribunal noted that such facilities are integral and incidental to the activity of running a hotel and are intended to cater to the needs of guests.
The revenue department had contended that under Explanation 2 of the Finance Act, properties used partly for business and partly for other purposes should be deemed as commercial property. However, the tribunal rejected this interpretation, stating that the premises continue to qualify as a building used by a hotel, which falls under a specific exclusion provided in Section 65(105)(zzzz) of the Act.
The bench relied on previous decisions by coordinate benches and the Supreme Court, which established that the legislative intent was not to tax immovable property used for hotels. Consequently, the tribunal found the impugned orders unsustainable and granted the appellant consequential relief, including the refund of pre-deposits made during the appeal process.