Page 58 - GSTL_20th August 2020_Vol 39_Part 3

272 GST LAW TIMES [ Vol. 39
6. The appellant herein had initially contracted with M/s. Movie Time
for the use of the theatre for ‘conducting’ and, on exercise of option, purportedly,
of purchase, transferred possession itself against annual ‘lease rental’ and one-
time ‘premium’ components. This would, prima facie, bring the contractual
agreement within the scope of the rentals considered by the Tribunal, and High
Courts, in the decisions cited before us. Furthermore, as pointed out in the im-
pugned order, the entire property, and its benefits thereof, had not been alienat-
ed by the appellant; the retention of right to built-up space above and around the
contracted property was incorporated in the agreement. It could, therefore, by no
means be determined to be a ‘sale’ agreement as commonly understood. Accord-
ingly, the consideration is for the limited use of the property which squarely fall
within the scope of Section 65(105)(zzzz) of Finance Act, 1994.
7. The decision in re Hobbs Brewers India Pvt. Ltd. has made it abundant-
ly clear that the claim of the petitioner therein for restricting the taxability to rent,
and not the premium, was dismissed as
‘5. … … without any basis whatsoever. What is taxable as the consideration
for the transfer. Even if premium is charged that is like charging of one time
rent and then rebate is given for the yearly event to be paid. Premium is al-
so part of the lease money. Therefore, the entire transaction both premium
and rent are amenable to service tax and service tax will have to be paid on
the same.
6. Another submission has been made … … That this premium includes
capital investment. We do not understand what is the meaning of this ar-
gument? It is true that the payment of premium will be treated as a capital
investment but this does not mean that it is not the consideration for the
lease.’
thereby laying down the principle that ‘premium’ is nothing but an advance
‘rent’, and, therefore, taxable which was adopted by the Tribunal in re RIICO Ltd.
to hold that, though premium was also taxable, an exception was carved out for
lease tenor exceeding 30 years arising from the specific provision incorporated
through Section 104 in Finance Act, 1994. Admittedly, this provision does not
apply to the present transaction.
8. In the established fact of absence of complete and entire ownership
of the property and, in the light of the decision in re Hobbs Brewers India Pvt. Ltd.
and in re RIICO Ltd., ‘premium’ being ‘rent’, except in the peculiar circumstances
of transactions with entities of State Governments, the only issue that remains for
resolution is the extent to which the decision in re Greater Noida Industrial Devel-
opment Authority favours the appellant.
9. The decision on the taxability of premium laying down that
‘10.1 A lease is a transaction, which has to be supported by consideration.
The consideration may be either premium or rent or both. The considera-
tion which is paid periodically is called rent. As regards premium, the Apex
Court in the case of Commissioner of Income Tax, Assam and Manipur v.
Panbari Tea Co. Ltd. reported in (1965) 3 SCR 811 has made a distinction be-
tween premium and rent observing that when the interest of the lessor is
parted with for a price, the price paid is premium or salami, but the period-
ical payments for continuous enjoyment are in the nature of rent, the for-
mer is a Capital Income and the latter is the revenue receipt. Thus, the pre-
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