2015 (9) TMI 790 - AT - Service Tax

Renting of Immovable Property - Co-owners / Joint property - SSI exemption upto 10 lakhs - notification no. 6/2005-ST dated 01/03/2005 - whether the respondent and his brothers are to be treated as association of persons or other wise and service tax liability on it arises; should be confined without the benefit of the notification No. 6/2005-ST - Held that - the ownership of the Property and providing of taxable renting of immovable Property by the four appellants in this case is in their individual capacity and, therefore, their tax liability should have been determined by considering their individual rental receipts and not collective one - Benefit of exemption vide notification no. 6/2005-ST was rightly extended - Decided in favor of assessee.

Summary

Issues:
1. Whether the co-owners of a property jointly engaged in renting out the property are to be treated as an association of persons for service tax liability.
2. Whether the benefit of notification No. 6/2005-ST applies to the case.
3. Whether penalties under Section 76 and 78 of the Finance Act, 1994 are applicable.

Issue 1:
The appeal revolves around determining whether co-owners of a property jointly engaged in renting it out should be treated as an association of persons for service tax liability. The Revenue contended that the co-owners were not disputing that the services fell under "renting of immovable property." However, the first appellate authority correctly found that the co-owners should not be considered jointly or severally liable for service tax. The authority noted that each co-owner had obtained separate registration certificates and paid their individual service tax liabilities. The appellate authority concluded that the co-owners should be considered as individual service providers, not jointly liable. The Tribunal upheld this conclusion, emphasizing the correct application of the law in this case.

Issue 2:
The second issue pertains to the applicability of notification No. 6/2005-ST to the case. The first appellate authority correctly determined that the co-owners were individually liable for service tax and were eligible for exemption under the said notification for certain years where their rental income fell below the exemption limit. The Tribunal concurred with this finding, highlighting that the co-owners had paid their service tax liabilities before any investigation or notice from the department. The Tribunal agreed that no penalty should be imposed for the relevant period as the co-owners had proactively paid their service tax dues.

Issue 3:
Regarding the penalties under Section 76 and 78 of the Finance Act, 1994, the Revenue argued that the penalties set aside by the first appellate authority were incorrect. However, the Tribunal found that there was no intentional suppression of facts by the co-owners to evade service tax. The Tribunal agreed with the first appellate authority's decision not to impose penalties under these sections. As the co-owners were individually liable for service tax and had paid their dues before any notice, the Tribunal held that no penalties should be levied. The Tribunal upheld the decision on penalties, as the co-owners were not in appeal against the imposition of penalty under Section 77 of the Finance Act, 1994.

In conclusion, the Tribunal rejected the Revenue's appeal, affirming the first appellate authority's decision on the issues discussed. The co-owners were deemed as individual service providers, eligible for exemption under the notification, and not subject to penalties under Sections 76 and 78.