2014 (11) TMI 86 - AT - Service Tax

Renting of immovable property - pure agent - joint venture - according to the Memorandum of Understanding entered into between 14 co-owners and the appellant, the appellant was allowed to enter into lease agreement/rental agreement and pay the co-owners in accordance with percentage fixed in the agreement, the amount received by them after retaining a percentage as their commission - Held that - Appellant only acted as a pure agent - it cannot be said that appellants have rented out the immovable property but it is the co-owners who have rented out the property. In view of the decision of the Tribunal in the case of Manju Champaklal Bafna 2013 (12) TMI 907 - CESTAT AHMEDABAD wherein in a similar situation, unconditional waiver of pre-deposit was granted where there were co-owners of the property, we consider that, in this case also, a similar treatment is required to be extended. Accordingly, the requirement of pre-deposit is waived and stay against recovery is granted during the pendency of appeal - Stay granted.

Summary

Issues:
1. Whether the appellant is liable to discharge service tax on rental income from immovable property.
2. Whether the appellant acted as a pure agent in the transactions.
3. Applicability of SSI benefit to the appellant.
4. Imposition of penalties by the revenue authorities.

Analysis:
1. The main issue in this case was whether the appellant, a builder of residential and commercial complexes, was liable to discharge service tax on the rental income from immovable property. The appellant had entered into an agreement with 14 co-owners of the land to construct a complex and then lease out the property. The Revenue contended that the appellant should pay service tax on the rental income. However, the Tribunal held that it was the co-owners who rented out the property, not the appellant. Citing a previous decision, the Tribunal waived the pre-deposit requirement and granted a stay against recovery during the appeal process.

2. Another issue addressed was whether the appellant acted as a pure agent in the transactions. The appellant argued that they were merely acting as a pure agent and paying service tax on the commission received under 'Business Auxiliary Service.' The Tribunal agreed with this submission and found that the appellant was eligible for the SSI benefit, hence not liable to pay service tax on such services.

3. The Tribunal also considered the applicability of the Small Scale Industry (SSI) benefit to the appellant. It was noted that the appellant was eligible for the SSI benefit, which exempted them from paying service tax on certain services. This further supported the Tribunal's decision to waive the pre-deposit requirement and grant a stay against recovery.

4. Lastly, the issue of penalties imposed by the revenue authorities was addressed. The Tribunal did not specifically mention the penalties in the judgment but focused on the main issue of service tax liability. The decision to waive the pre-deposit and grant a stay against recovery during the appeal process indirectly addressed the issue of penalties as well.

In conclusion, the Tribunal ruled in favor of the appellant, finding that they were not liable to discharge service tax on the rental income from immovable property, considering them as pure agents eligible for SSI benefit. The decision highlighted the importance of understanding the roles of parties involved in complex transactions to determine tax liabilities accurately.