Rent Paid to Directors in Personal Capacity Not Taxable Under Reverse

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has ruled that rent paid by a company to its directors in their personal capacity for immovable property is not subject to service tax under the Reverse Charge Mechanism (RCM). The revenue department had contended that since the directors were providing a service to the company, the company was liable to pay service tax under RCM. However, the tribunal drew a clear distinction between the services provided by a director as a director and services provided in a personal capacity, such as renting out a privately-owned property. The CESTAT concluded that the renting of immovable property by a director in their individual capacity is a separate transaction and does not fall under the purview of services supplied by a director to the company. This decision provides crucial clarity on the tax treatment of such transactions.