2019 (6) TMI 16 - AT - Service Tax

Threshold limit for liable to pay service tax - Renting of Immovable Property Services - co-owner of the Complex - HELD THAT - The property has been purchased jointly by the appellant and her husband Shri. M.S. Paramasivam. Several lease agreements have also been produced before us. Some of the lease agreements are entered into by both the appellant and her husband. It is very much brought out by the documents that the appellant is not the absolute owner of the property Lakkshmi Arcade . The sale deed as well as the related documents shows that the property is owned jointly by the appellant and her husband. The contention of the Department that in the land revenue records the name of the appellant alone is shown cannot be made the basis for confirmation of the demand, especially when there is no proof that the village records have been updated. It is not disputed that the income by way of rent is received by them separately and reflected in their income tax returns separately. This being the case, the mere reliance on the land revenue records is not correct. When the property is owned jointly by the appellant and her husband, the demand of service tax raised on the appellant alone, therefore, cannot be sustained. Ld. Advocate for the appellant also contends that if the rent is shared between the appellant and her husband, they would come under the threshold limit - This aspect, however, requires verification. If the rent received by the appellant separately is below the threshold limit during the disputed period, then the appellant would not be liable to pay service tax. Appeal allowed by way of remand.

Summary

Issues:
1. Demand of service tax on renting of immovable property services.
2. Ownership of the property and liability to pay service tax.
3. Interpretation of rental income sharing between co-owners for service tax liability.
4. Verification of threshold limit for service tax liability.

Analysis:

Issue 1: Demand of service tax on renting of immovable property services
The appellant was providing taxable services under the category of 'Renting of Immovable Property Services'. A Show Cause Notice was issued proposing to demand the short paid service tax along with interest and penalties. The Original Authority confirmed the demand, which was upheld by the Commissioner (Appeals), leading to the appeal before the Tribunal.

Issue 2: Ownership of the property and liability to pay service tax
The appellant claimed to be a joint owner of the property along with her husband, presenting evidence of joint purchase and lease agreements. The Department argued that the property was solely owned by the appellant based on land revenue records and lease agreements signed only by her. The Tribunal found that the appellant and her husband were joint owners as per the sale deed and related documents, rejecting the Department's reliance on land revenue records.

Issue 3: Interpretation of rental income sharing between co-owners for service tax liability
The appellant argued that since the rental income was shared equally between her and her husband, it should be considered separately for service tax calculation. The Tribunal agreed, citing a previous case where co-owners' rent receipts were not clubbed together for service tax demand.

Issue 4: Verification of threshold limit for service tax liability
The Tribunal remanded the matter to the adjudicating authority to verify if the rent received by the appellant fell within the threshold limit during the disputed period. If the rent was below the threshold, the appellant would not be liable to pay service tax. The Tribunal set aside the demand but directed verification of the threshold limit for service tax liability.

In conclusion, the Tribunal allowed the appeal, setting aside the demand and remanding the matter for verification of the threshold limit for service tax liability based on the rental income received by the appellant during the disputed period.