2023 (1) TMI 918 - AT - Service Tax

Short payment of service tax - Renting of Immovable Property Services - clubbing of amount received by individual owner (39 individual owners) for renting of their immovable property - HELD THAT - The rented property are owned by 39 individual in their name individually and separately and they had entered into lease agreement with the State Bank of India to provide their individual property collectively to the Bank through single lease agreement. The Appellants also placed on records a copy of Lease deed signed by each individual owner, copies of Municipal Tax Bills issued in the name of each owner separately. It is also found that in the present matter individual owner received the rent separately and independently. As per the payment terms, Bank paid different amount of rent to individuals as per their property. Therefore irrespective of associations of the property, the important aspect is that who are the parties in the agreement and who have received the payment on account of renting of immovable property and who is the service provider. The amount received by individual owner for renting of their immovable property cannot be clubbed for the purpose of service tax demand. Therefore, the demand is apparently not sustainable. It is very much brought out by the documents that the appellant is not the absolute owner of the rented property. The lease deed as well as the related documents shows that the property is owned by the individual owners and it is not disputed that the income by way of rent is received by individual owners separately and reflected in their income-tax returns separately. When the property is not owned by the appellant and they have not received the rent, the demand of service tax raised on the appellants alone, therefore, cannot be sustained. Appeal allowed.

Summary

Issues:
Interpretation of liability under "Renting of Immovable Property Services" for associations renting out properties to State Bank of India.

Analysis:
The case involved a dispute regarding the liability of two associations, M/s Jagdish Warehouse Owner Association and M/s Ravi Chambers Owner Association, for service tax under the category of "Renting of Immovable Property Services" as they had rented out properties to State Bank of India. The original authority and the Commissioner (Appeals) had confirmed the service tax demand along with interest and penalties. The main argument put forth by the Appellants was that the associations were not the owners of the properties and did not provide them on rent to the bank. They contended that the individual owners of the properties had leased them to the bank, and the associations were not liable for the alleged service tax. The Appellants highlighted that the individual owners had separate agreements with the bank and received rent individually, not exceeding the threshold exemption limit. They emphasized that the associations did not intend to avoid service tax by showing themselves as independent property owners. The Commissioner (Appeals) had noted that the individual owners lacked essential property ownership rights, but the Appellants argued that the risks and rewards of the properties belonged to the individual owners, not the associations.

The Appellants' counsel argued that the demand for service tax against the associations was legally incorrect as they were not the actual service providers, and the rented properties were owned by the individual owners. They presented lease deeds and municipal tax bills in the names of individual owners, demonstrating that the rent was received separately by each owner. The Tribunal observed that the crucial aspect was identifying the parties in the lease agreement and the recipients of the rent to determine the service provider. The Tribunal concluded that the demand for service tax was unsustainable as the associations were not the absolute owners of the properties and did not receive the rent. The Tribunal held that since the Appellants were not the service providers and did not receive the rent, the demand for service tax against them could not be upheld. Therefore, the impugned order confirming the service tax demand was set aside, and the appeal was allowed with consequential relief, if any.

In summary, the Tribunal ruled in favor of the Appellants, emphasizing that the associations were not liable for the service tax on "Renting of Immovable Property Services" as they were not the actual service providers and did not receive the rent from the properties leased to State Bank of India. The Tribunal highlighted the individual ownership of the properties and the separate rental agreements with the bank, leading to the conclusion that the demand for service tax against the associations was legally unsustainable.