Service Tax on Renting of Immovable Property – High Court upholds levy as well as Retrospective amendment
THE Punjab and Haryana High Court recently upheld the levy of Service Tax on “renting of immovable Property” and the retrospective amendment. In a detailed order covering several court decisions, the Constitution and treatises on the aspect theory, the High Court held that it cannot be held that renting of property did not involve any service as service could only be in relation to property and not by renting of property. Renting of property for commercial purposes is certainly a service and has value for the service receiver. Moreover, the aspect of service element in renting transaction is certainly an independent aspect covered under Entry 92C read with Entry 97 of List I. In any case, subject matter of impugned levy being outside the scope of entry 49 of List II, power of Union Legislature is undoubted. Question whether levy will be harsh being in addition to income tax and property tax is not a matter for this Court once there is legislative competence for the levy. Even if it is held that transaction of transfer of right in immovable property did not involve value addition, the provision cannot be held to be void in absence of encroachment on List II.
On retrospective amendment, the High Court held that it is well settled that competent legislature can always clarify or validate a law retrospectively. It cannot be held to be harsh or arbitrary. Object of validating law is to rectify the defect in phraseology or lacuna and to effectuate and to carry out the object for which earlier law was enacted.
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