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2019 (5) TMI 1485 - AT - Service TaxSSI exemption - claim of SSI Exemption upto ₹ 10 lakhs - Renting of immovable property - association of person (AOP) - clubbing of consideration - crossing over of threshold limit - HELD THAT - Though in respect of one property, there are joint owner but each joint owner is independent in respect of ownership of respective shares, therefore, whatsoever consideration received by an individual, it is the subject matter of taxation in respect of that individual person either as per income tax or as per service tax. Rental income of other co-joint owner cannot be considered. Receipt of rental income by every individual is only subject to liability of service tax - If the value is below thresh-hold exemption limit in case of any individual, the same will not be taxable being exempted under Notification No. 06/05-ST dated 01.03.2005. At the same time in case of any individual person if the thresh-hold limit exceed in financial year, the same will be liable for service tax. The issue decided in the case of SAROJBEN KHUSALCHAND OTHERS VERSUS C.S.T. -SERVICE TAX - AHMEDABAD 2017 (5) TMI 240 - CESTAT AHMEDABAD where it was 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. Service tax liability do not arise - appeal allowed - decided in favor of appellant.
Issues Involved:
1. Whether joint owners of a property should be considered as an association of persons (AOP) for service tax purposes. 2. Whether rental income received by individual joint owners should be clubbed together for service tax liability. 3. Applicability of Notification No. 06/05-ST dated 01.03.2005 for exemption from service tax. Issue-wise Detailed Analysis: 1. Whether joint owners of a property should be considered as an association of persons (AOP) for service tax purposes: The department argued that joint owners of a property should be treated as an association of persons (AOP), and thus their rental income should be clubbed together, exceeding the exemption threshold limits of ?4 lakhs and ?8 lakhs, making it liable for service tax. However, the appellants contended that each joint owner is an independent owner of their respective share in the property, and their rental income should not be clubbed with others. The Tribunal agreed with the appellants, stating that the relationship between joint owners is not of a commercial concern like an AOP. The Tribunal referenced various judgments, including Sarojben Khushalchand and Deoram Vishrambhai Patel, which supported the view that joint owners should not be considered as an AOP for service tax purposes. 2. Whether rental income received by individual joint owners should be clubbed together for service tax liability: The Tribunal found that each joint owner is independent regarding their share of the property and the consideration received by an individual should be subject to taxation individually. The Tribunal emphasized that service tax should be levied on the service provided by each individual service provider, not collectively on all joint owners. The Tribunal referenced the Sarojben Khushalchand case, which highlighted that joint owners are provided separate PAN numbers and should be assessed individually for tax purposes. The Tribunal rejected the Revenue's argument that the property is indivisible and service tax should be levied on the total rent received without apportioning it among the co-owners. 3. Applicability of Notification No. 06/05-ST dated 01.03.2005 for exemption from service tax: The Tribunal held that if the rental income received by an individual joint owner is below the threshold exemption limit specified in Notification No. 06/05-ST, the income is exempt from service tax. The Tribunal referenced the Deoram Vishrambhai Patel case, where it was established that individual co-owners who jointly owned the property and provided the service of renting immovable property are eligible for the exemption under Notification No. 06/05-ST. The Tribunal noted that the first appellate authority had correctly determined the tax liability based on individual rental receipts and not collectively. The Tribunal upheld the benefit of the exemption notification for individual co-owners, provided their rental income did not exceed the exemption limits during the relevant period. Conclusion: The Tribunal set aside the impugned orders and allowed the appeals with consequential relief, if any, as per law. The Tribunal emphasized that joint owners should be assessed individually for service tax purposes, and their rental income should not be clubbed together. The exemption under Notification No. 06/05-ST is applicable to individual co-owners if their rental income is below the threshold exemption limit. The Tribunal referenced various judgments to support its decision, ensuring that the assessment of service tax liability is done correctly and fairly for individual joint owners.
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