Senior Counsel Dr. Abhishek Manu Singhvi’s arguments in an earlier case helped to secure five petitioners favorable stay orders from the Delhi High Court on June 1 regarding the issue of levy of service tax on commercial rentals, pursuant to the amendments of the Finance Act, 2010.

The Delhi High Court had in April ’09 in Home Solutions Vs Union of India, held that service tax should not be levied on rental arrangements, in absence of any value addition by the landlords and the court set aside a Notification and a Circular imposed by the Government that sought to levy service tax on pure renting arrangements for commercial properties.

While an appeal against the order of the Delhi High Court was pending before the Supreme Court, the Government started issuing notices to various assessees at different places in India. However, the government later withdrew the demands.

While the appeal was still pending before the Supreme Court, the Finance Act 2010, sought to levy the service tax on renting with retrospective effect. The levy was sought to be brought in by way of an amendment to the relevant service tax provision.

The Hometown petition was followed by several other parties who challenged the amendments on various grounds, including their unconstitutionality. The stay order passed on June 1 were granted following the first stay granted last week on May 18 to Home Solutions represented by Senior Counsel Abhishek Manu Singhvi with Naik Paranjpe & Co’s Ameet Naik, Rishi Aggarwala, Nakul Mohta and Pankaj Patel. The Government was represented by H.C. Bhatia, Pratap Singh Parmar, Sumit Batra and Mukesh Anand.

Speaking to Bar & Bench, Partner of the Delhi based Lex Counsel Alishan Naqvi, who is representing five of the total twenty two petitioners said, “The stay protects the petitioners, and in many cases the respondents being the landlords from any demands of service tax on commercial rental arrangements. The stay orders are however subject to the understanding that if the case is finally decided in favour of the revenue, the petitioners will bear their respective liabilities.”