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2023 (10) TMI 739 - AT - Service TaxLevy of Service Tax - SSI exemption and clubbing of rent - renting of property - Joint Ownership - renting out the show rooms/ shops/ office located at First Floor of President Plaza Building to M/s Urban Development Group (UDG) and clubbing to deny SSI exemption - HELD THAT - There is a grave error made by the revenue by issuing a show cause notice to M/s. Dineshbhai M Patel Ors. There is no such entity, who received entire rent of the property. As per rent agreement, it is clear that the rent is on account of eight persons in the different proportion. From the proportion of the rent (given), it is clear that the total rent is not on account of Dineshbhai M Patel alone but it is in different proportion to individual of eight persons. Therefore, the entire rent cannot be considered as consideration of M/s Dineshbhai M Patel. On taking the rent proportion of each person, it will much below the threshold limit of small scale exemption provided under notification No. 06/2005-ST dated 01.03.2005 as amended by notification No. 04/2007-ST dated 01.03.2007 and Notification No. 08/2008-ST dated 01.03.2008. Accordingly, no Service Tax demand arises against any one. This issue has been considered in the various judgments cited by the appellant, wherein in the case of the joint agreement of different owner of the property made for lease to any corporate and in the said judgments, it is categorically held that the rent of individual's portion may be taken as the gross value against that individual person and cannot be taken combinedly - reliance can be placed in COMMISSIONER OF CENTRAL EXCISE, NASIK VERSUS DEORAM VISHRAMBHAI PATEL 2015 (9) TMI 790 - CESTAT MUMBAI . Appeal allowed.
Issues involved:
The issue involves liability to pay Service Tax on renting a property by multiple individuals, demand raised against multiple lessors, consideration of rent in proportion to individual shares, and applicability of small scale exemption limit. Summary: Issue 1: Liability to pay Service Tax on renting property by multiple individuals The appellant, along with seven others, rented out show rooms/offices to a lessee. The department claimed Service Tax on the rent collected. The appellant argued that all eight lessors should be considered, not just the appellant, as the property was jointly owned. The Tribunal noted that the rent was distributed among the eight lessors in different proportions, as per the agreement. Therefore, the entire rent could not be attributed solely to the appellant, and each lessor's share fell below the small scale exemption limit. Citing relevant judgments, the Tribunal held that no Service Tax liability existed for any individual lessor. Issue 2: Demand raised against multiple lessors The revenue issued a show cause notice to "M/s. Dineshbhai M Patel & Ors.," which was deemed incorrect as there was no such entity. The rent agreement clearly specified the share of rent for each of the eight lessors. The Tribunal concluded that the demand made against the appellant alone was erroneous, as the rent was distributed among all lessors based on their ownership shares. Issue 3: Consideration of rent in proportion to individual shares The Tribunal examined the proportion of rent allocated to each lessor, as detailed in the agreement. It was evident that the total rent was not solely for the benefit of Dineshbhai M Patel but was distributed among all eight individuals. As each person's share of the rent was below the exemption limit, no Service Tax liability could be imposed on any individual lessor. Issue 4: Applicability of small scale exemption limit Considering the small scale exemption limit provided under relevant notifications, the Tribunal found that when the rent proportion of each lessor was taken into account, it fell below the threshold for Service Tax liability. Relying on precedent, the Tribunal overturned the impugned order and allowed the appeal, determining that no Service Tax demand was warranted for any of the lessors. This judgment highlights the importance of considering the ownership structure and individual shares in rental agreements when determining Service Tax liability, emphasizing the need for accurate allocation of rent among multiple lessors to avoid erroneous tax demands.
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