2015 (10) TMI 2514 - HC - Service Tax

Constitutional validity - Demand of service tax while treating the petitioners as joint holder of the immovable property for the purpose of renting thereof - Scope of the definition of the term Person - association of persons or body of individuals, whether incorporated or not - Scope of Section 65B(37) - Held that - A perusal of the above provisions shows that the word person has been defined to include an association of persons or body of individuals whether incorporated or not under clause 37(vii) of Section 65B of the Finance Act. In the present case, the petitioners are owners of the premises in question. They are receiving rent from the tenant though individually. Nothing has been shown by the learned counsel for the petitioners that the Parliament was not empowered to define the expression Person in the statute. Once there exists legislative competence in the Parliament to enact a provision, in the absence of the learned counsel for the petitioners to demonstrate that the same is arbitrary, discriminatory or violative of Article 14 of the Constitution of India, it cannot be declared to be unconstitutional. Writ petition dismissed. - Decided against the assessee.

Summary

Issues:
Challenge to the vires of Section 65B(37) of Finance Act, 2012 regarding the definition of "person" and seeking direction to restrain issuance of show cause notice for service tax.

Analysis:
The petitioners contested the validity of Section 65B(37) of the Finance Act, 2012, which defines "person" to include an association of persons or body of individuals, whether incorporated or not. They argued that this definition infringes on their legal rights by making them jointly liable for service tax, despite individually owning shares in the rented property. The petitioners received separate notices related to service tax on the rented property they co-own, and they emphasized their individual ownership shares and tax filings. The petitioners relied on the General Clauses Act, 1897, and the Income Tax Act, 1961, to support their claim that their individual ownership shares should be respected for tax purposes.

The court examined the provisions of Section 65B(37) of the Finance Act, 2012, alongside the General Clauses Act, 1897, and the Income Tax Act, 1961. The court noted that the definition of "person" under the Finance Act includes associations of individuals, whether incorporated or not. The petitioners' argument was based on the contention that they should not be treated as an association of persons for tax assessment purposes due to their individual ownership shares in the rented property. However, the court found that the Parliament had the authority to define "person" in the statute, and the petitioners failed to prove any arbitrariness or violation of constitutional provisions. As a result, the court dismissed the petition, stating that no grounds for interference under Articles 226/227 of the Constitution of India were established.

In conclusion, the court upheld the validity of Section 65B(37) of the Finance Act, 2012, and rejected the petition challenging the definition of "person" and seeking relief from service tax liability based on individual ownership shares in jointly owned property.