2013 (9) TMI 791 - HC - Service Tax

Separate Legal Entity or not renting of immovable property - The petitioner pointed to the certificate of incorporation of the Church of South India Trust Association issued u/d 248(5) of Indian Companies Act, 1913 as also the memorandum of association of the Church of South India Trust Association, to submit that the Karnataka Central Diocese was a Unit and was not a separate legal entity - The petitioner-CSTIA, Karnataka Central Diocese was not an assessee nor a person for the purpose of service tax. Held that - respondent-revenue does not oppose the submission that petitioner is not a legal entity but serves as a Unit of the CSITA and that if at all any proceeding is to be initiated, it is against CSITA - The petition was accordingly allowed in part - The vires of Section 65(90)(a) and Section 65(105)(zzzz) of the Finance Act, 1994 though questioned in this petition does not survive for consideration and was kept open for consideration in an appropriate proceeding - If the Finance Act, 1994 in respect of the service tax applies to Church of South India Trust Association which is the organization which owns and holds immovable property, it was open for the respondent-revenue to apply its mind before taking any action for the purpose of issue of proposition notice.

Summary

Issues involved:
Interpretation of legal entity status of a unit within an organization for service tax liability.

Detailed Analysis:

The judgment by Ram Mohan Reddy, J., addresses the issue of whether the Karnataka Central Diocese, a unit within the Church of South India Trust Association (CSITA), is a separate legal entity for the purpose of service tax liability. The petitioner argued that the Karnataka Central Diocese is not an assessee or a separate legal entity, emphasizing the 'certificate of incorporation' and memorandum of association of the CSITA. The petitioner contended that the service tax commissioner erroneously imposed liability on them for renting out property for hoardings and office/commercial premises. The order dated 29.3.2012 imposing service tax, interest, and penalties was challenged on the grounds that the agreements were entered into by the CSITA, not the petitioner unit.

The learned counsel for the respondent acknowledged that the petitioner is not a distinct legal entity but functions as a unit of the CSITA. The judgment partially allowed the petition, quashing the order Annexure-A. It was noted that the challenge to the vires of Section 65(90)(a) and Section 65(105)(zzzz) of the Finance Act, 1994 was not considered in this petition and was left open for future proceedings. The court clarified that if the Finance Act, 1994 applies to the CSITA, the respondent-revenue should assess the situation before issuing any further notices regarding service tax liability.

In conclusion, the judgment focused on determining the legal entity status of the Karnataka Central Diocese within the CSITA concerning service tax obligations. It highlighted the distinction between the unit and the overarching organization, emphasizing the need for proper assessment before imposing tax liabilities. The decision provided clarity on the jurisdiction and responsibilities regarding service tax matters involving units within larger associations, ensuring a fair and accurate application of tax laws.