2017 (9) TMI 158 - AT - Service Tax

Renting of immovable property service - the amount of rent was equally paid by the lessee to these three persons namely Pandurang Hulawale, Sambhaji Hulawale and Jaymala Sambhaji Hulawale - case of appellant is that entire rent amount cannot be clubbed and treated as income of one person i.e. the appellant - Held that - As per the payment terms, all the three persons were paid different amount of rent to individual after deduction of TDS - The amount received by other two persons is their income and the same cannot be clubbed with the rent received by the appellants. As per the amount received by the appellants, it is very much below the threshold limit of ₹ 8 lakhs up to which the service tax is exempted - demand not sustainable - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Demand of service tax on renting of immovable property service
- Clubbing of rent amount received by multiple persons
- Exemption limit of service tax based on rent threshold

Analysis:
The case involved a dispute regarding the demand of service tax on renting of immovable property service. The appellants had entered into a contract for renting commercial premises, receiving rent amounts exceeding the threshold for service tax. The appellant argued that the lease agreement was in the names of three individuals who collectively owned the property with the lessee. The appellant contended that since the rent was equally paid to these three individuals, the total rent amount should not be treated as the income of one person. The appellant's representative argued that when considering the rent received by the appellant individually, it fell below the threshold limit for service tax exemption. Additionally, the lessee had made payments to individual owners after deducting TDS as per the Income Tax Act, further supporting the appellant's position.

The revenue authority, represented by the AC (AR), reiterated the findings of the impugned order, upholding the demand for service tax. However, the Tribunal, after considering both parties' submissions, emphasized that the crucial aspect was the parties involved in the agreement and who received payments for renting the property. The Tribunal noted that each of the three individuals named in the agreement received different amounts of rent individually after TDS deduction. Therefore, regardless of property ownership, the rent received by each individual should be considered their income separately. In the case of the appellant, the rent amounts received were below the threshold limit for service tax exemption, rendering the demand unsustainable.

Consequently, the Tribunal set aside the impugned order, allowing the appeal in favor of the appellant. The judgment was pronounced on 17/7/2017 by the Tribunal, comprising Shri Ramesh Nair, Member (Judicial), and Shri Raju, Member (Technical).