Commercial leasing by statutory authorities is taxable notwithstanding their statutory status.

Delhi Development Authority (“DDA”), a statutory body constituted under the Delhi Development Authority Act, 1957, was registered for certain taxable services but was not registered or paying service tax on amounts received from leasing or renting immovable property, including Nazul/government land, against lease premium, ground rent and other consideration.

It also received membership and subscription charges in relation to its sports complexes. Following departmental audits and investigations, show-cause notices were issued for various periods between 2007–08 and 2014–15, proposing substantial service-tax demands.

The demands were confirmed through the impugned orders-in-original. In the later adjudication, the adjudicating authority excluded the period before 1 July 2010 in respect of vacant land but confirmed liability on other renting activities and on club-related receipts.

DDA appealed to the Tribunal; it did not appear when the appeals were heard, and the Tribunal proceeded on the basis of the departmental submissions and the appeal records.

1. Whether DDA’s leasing or renting of immovable property, including Nazul/government land, for consideration by way of lease premium, ground rent or similar receipts constituted a taxable service despite DDA being a statutory authority performing statutory functions.

2. Whether lease premium or salami received by DDA was liable to service tax under the pre-negative-list and post-negative-list service-tax regimes.

3. Whether membership and subscription charges received by DDA’s sports complexes constituted taxable club or association services, or were receipts connected with a sovereign/statutory function.

4. Whether the service-tax demands were sustainable for the relevant periods, including the treatment of renting of vacant land before 1 July 2010.

The Tribunal applied Section 65(105)(zzzz) of the Finance Act, 1994, under which renting, letting, leasing, licensing or similar arrangements concerning immovable property for use in the course or furtherance of business or commerce constituted “renting of immovable property”; the provision also covered permitting use of space irrespective of transfer of possession or control.

For the post-negative-list period, Section 65B(44) defined “service” broadly as an activity carried out by one person for another for consideration, subject to specified exclusions; the Tribunal held that DDA’s activity fell within this definition and was not covered by Section 66D.

Relying on Krishi Upaj Mandi Samiti, New Mandi Yard, Alwar v. Commissioner of Central Excise & Service Tax, Alwar, the Tribunal held that statutory authorities are exempt from service tax only in respect of mandatory statutory activities funded by compulsory levies deposited into the Government treasury; services independently undertaken for consideration remain taxable.

It also relied on Circular No. 89/7/2006-ST dated 18 December 2006, the Larger Bench ruling in RIICO Ltd. concerning the taxability of lease premium/salami, and Greater Noida Industrial Development Authority v. CCE & ST, Noida concerning vacant land prior to 1 July 2010.

The Tribunal rejected DDA’s argument that its statutory character and development-related mandate immunised all its receipts from service tax. Applying Krishi Upaj Mandi Samiti, it distinguished compulsory statutory fees deposited into the Government treasury from commercial consideration received for leasing property.

DDA had not established that lease premiums, ground rent and related receipts were statutory levies rather than consideration for permitting the use or enjoyment of immovable property.

The statutory definition of renting expressly covered leasing and similar arrangements, and the post-1 July 2012 activity was also a “service” under Section 65B(44), without any applicable exclusion under Section 66D.

The Tribunal further accepted the applicability of the RIICO principle that lease premium or salami could attract service tax.

In relation to DDA’s sports complexes, membership and subscription receipts were found to arise from commercial activities and not from the discharge of sovereign functions.

The Tribunal noted that the adjudicating authorities had already excluded renting of vacant land for the period before 1 July 2010 in accordance with Greater Noida Industrial Development Authority, but found no basis to disturb the remaining confirmed demands.

Membership and subscription charges from the sports complexes were likewise taxable commercial receipts.

The Tribunal found no infirmity in the impugned adjudication orders and dismissed both Service Tax Appeal Nos. 50278 of 2017 and 50191 of 2021.