A division bench led by Justice DK Deshmukh and Justice JP Devadhar granted relief while hearing a petition by RAI members challenging the constitutional validity of service tax on rented properties.
“The members have to file a written undertaking that in case their application against such tax was disallowed, they will pay the pending amount in accordance with statutory provisions,” the jury observed.
The jury held that if such an undertaking was filed by the RAI members, no steps will be taken to recover the tax. Members giving the undertaking cannot transfer interest in the said property without prior notice.
According to the court, if the tax authorities do not take objection on such notice within two weeks, the interest in the property can then be transferred. But if the tax authorities take objection, the members will have to seek the court’s permission for the proposed transfer.
RAI chief executive Gibson G Vedamani said: “We are delighted by the order. We had earlier made representations to the union ministry of finance to withdraw the tax. One of the largest costs in this trade is rent for premises, and the service tax on rents pushes up operating costs in a big way.”