2024 (2) TMI 820 - AT - Service Tax

Renting of immovable property service - Liability of Appellant (Partnership Firm) is liable to discharge service tax on property jointly owned by parents of the Appellant Firm - benefit of SSI Exemption under notification No. 06/225-ST dated 01.03.2005 - denied to the co-owners of jointly owned property on the ground that aggregate value of service (rent arising from the said property is beyond threshold limit, regardless of the fact that rent received by each of the co-owners was much lower than the threshold limit - HELD THAT - There is no dispute that irrespective of any agreement of RM with the present appellant the rent was paid by RM individually to the co-owners and TDS from the amount payable was deducted by RM. No amount was received by the appellant being a partnership. In this case the person who received the amount of rent directly from RM shall be treated a person liable to pay Service Tax. However, since the total receipt of rent by individual is less than the threshold limit as provided under exemption notification No. 6/2005/ST dated 01.03.2005 co-owners are not liable to pay Service Tax. This issue has been considered time and again in various judgments. It is settled that even though for one single property if the co-owners are receiving the rent individually in their account the total rent cannot be considered as one for levy or Service Tax. Every individual who receive the rent as co-owners he should be treated as individual Assessee and if the total receipt does crosses threshold limit of exemption they are liable to pay Service Tax otherwise not. Applicability of judgement in the case of Gtail Corporation - HELD THAT - As regard the judgment relied upon by the revenue in the case of Gtail Corporation, on going through the same, it is found that in that case the fact are totally different in as much as the rent was first received by the partnership firm and subsequently the partnership firm has distributed amount of rent to individual partners. Accordingly, it is a firm who is the recipient of the rent and thereafter individual share has been distributed. Whereas, in the present case it is not the appellant (partnership firm) received the rent but the rent was directly received by individual in their account. Therefore, the ratio of the judgment in the case of Gtail Corporation is not applicable being its fact is totally different - the ratio of the judgment in the case of Gtail Corporation is not applicable being its fact is totally different. The demand against the appellant who is not the recipient of the rent cannot be sustained - the impugned order is set aside. The appeal is allowed.

Summary

Issues Involved:
1. Liability of a Partnership Firm to discharge service tax for renting of immovable property jointly owned by parents of the Firm.
2. Denial of SSI Exemption to co-owners of jointly owned property due to rent exceeding threshold limit.

Summary:
Issue 1: The Partnership Firm, engaged in leasing out a cinema theatre, jointly owned a property built into a theatre for cinema exhibition. Rent from the property was received by individual co-owners independently, credited to their accounts, and TDS was deducted by the tenant. The department argued that as partners of the Firm, they are liable to pay Service Tax. However, the Firm contended that the rent was received individually by co-owners, making them liable for Service Tax, if applicable, based on the threshold exemption limit.

Issue 2: The Tribunal found that each co-owner, as an independent service provider, received rent individually, making them liable for Service Tax if the rent exceeded the threshold exemption limit. Various judgments supported the view that individual co-owners should be treated separately for taxation purposes, and the total rent cannot be considered as one for Service Tax levy. The Tribunal distinguished a case where a partnership firm received rent and distributed it among partners, noting that in the present case, individual co-owners directly received the rent. Therefore, the demand against the Partnership Firm, which did not receive the rent, was not sustainable.

In conclusion, the impugned order was set aside, and the appeal was allowed, emphasizing that individual co-owners should be treated as separate assesses for Service Tax liability based on their individual rent receipts and the threshold exemption limit.