Service tax on renting - Validity and Retrospective amendment upheld - Interim stay orders to continue till month end - High Court
THE Bombay High Court has upheld the levy of Service Tax on renting and the retrospective amendment of the Act. The High Court held that the legislative basis that has been adopted by Parliament in subjecting taxable services involved in the renting of property to the charge of service tax cannot be questioned. The assumption by a legislative body that an element of service is involved in the renting of immovable property is certainly not an assumption which can be regarded by the Court as being so manifestly absurd or perverse as to lead to an inference that Parliament had treated as a service, an item which in no rational sense could be regarded as involving service. But more significantly, even if the Court were to proceed on the basis, suggested by the Petitioners that no element of service is involved, that would not make the legislation beyond the legislative competence of Parliament. So long as the legislation does not trench upon a field, which has been reserved to the State legislatures, the only conclusion that can be drawn is that the law must be treated as valid and within the purview of the field set apart for Parliament.
The Court held that plenary power of Parliament to legislate can extend to enacting legislation both with prospective and with retrospective effect.
This is certainly not the end of the story - the matter will go the Supreme Court. Immediately after the judgement was delivered, the Counsel requested the High Court to extend the interim stay granted earlier to enable the Petitioners to seek recourse to their remedies in appeal. The High Court directed that interim orders would remain operational for four weeks.
But is it worth challenging a levy? Please see, “ Challenging Imposition of Service Tax - Not a Wise Business Policy ? ” in DDT 1635 - 22.06.2011.
We bring you the Bombay High Court order today. Please see Breaking News.