2017 (5) TMI 240 - AT - Service Tax

Claim of small scale exemption upto ₹ 10 Lakhs - Association of persons - N/N. 6/2005-ST, dt.1.3.2005 as amended - immovable property has been jointly owned by six co-owners - Alleging that the services provided by the respective owners are indivisible and the property being collectively owned, for the purpose of Service Tax, all the owners be considered as an association of persons, and be treated as single service provider, hence, the benefit of said N/N. 6/2005-ST, dt.1.3.2005 as amended, would not be available to each of the co-owner - whether each of the co-owner, holding immovable property jointly, but receive the lease rent separately in proportion to the share in the property, is eligible to the benefit of threshold exemption limit as prescribed under N/N. 6/2005-ST, dt.1.3.2005, as amended, separately? Held that - the service Tax Registration of individual assessees for collection of service tax is PAN based, hence, collection of service tax from one of the co-owners, against his individual Registration for the total rent received by all co-owners separately, is neither supported by law nor by laid down procedure. Thus, it is difficult to accept the proposition advanced by the Revenue that all the co-owners providing the service of renting of immovable property be considered as an association of persons and the service tax on the total rent be collected from one of the co-owners. Conceptually service tax is levied on the service provided, which is an intangible thing and hence it is not necessary to be identified with physical demarcation of the immovable property given on rent against individual co-owners. Once the value of service provided by a service provider is ascertainable service tax is accordingly charged - This Tribunal in similar facts and circumstances in the cases of Commissioner of Central Excise, Nasik Versus Deoram Vishrambhai Patel 2015 (9) TMI 790 - CESTAT MUMBAI after considering the issues raised, rejected the contention of the Revenue and allowed the benefit of exemption Notification No.6/2005-ST, dt.1.3.2005 as amended to individual co-owners who jointly owned the property and provided the service of renting of immovable property, and received the rent in proportion to the shares in the immovable property. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Eligibility of individual co-owners for Service Tax exemption under Notification No.6/2005-ST.
2. Consideration of co-owners as an "association of persons" for Service Tax purposes.
3. Applicability of the General Clauses Act definition of "person" to co-owners.
4. Impact of Income Tax assessments on Service Tax liability.

Issue-wise Detailed Analysis:

1. Eligibility of individual co-owners for Service Tax exemption under Notification No.6/2005-ST:
The appellants owned an immovable property jointly and provided it on lease to a tenant. Each co-owner received rent proportionate to their share and claimed exemption under Notification No.6/2005-ST. The Revenue argued that the property being collectively owned and indivisible should be treated as a single service provider, thus denying individual exemptions. The Tribunal, however, found that each co-owner, receiving rent separately, is eligible for the benefit of the exemption notification. The Tribunal cited previous decisions, including Deoram Vishrambhai Patel and Luxmi Chaurasia, which supported individual exemptions for co-owners.

2. Consideration of co-owners as an "association of persons" for Service Tax purposes:
The Revenue's position was that the co-owners should be treated as an association of persons, thus making them a single service provider for Service Tax purposes. The Tribunal disagreed, stating that the co-owners were not an association of persons as defined by the Supreme Court in Commissioner of Income Tax Vs Indira Balkrishna. The Tribunal emphasized that the co-owners did not form an association for the purpose of providing taxable services and were assessed individually for Income Tax purposes.

3. Applicability of the General Clauses Act definition of "person" to co-owners:
The Revenue argued that the definition of "person" under Section 3(42) of the General Clauses Act, which includes an association of persons, should apply. The Tribunal rejected this argument, stating that the co-owners, despite jointly owning the property, were assessed individually for Income Tax and had separate PAN numbers. The Tribunal held that the definition in the General Clauses Act was not relevant to the facts of the case.

4. Impact of Income Tax assessments on Service Tax liability:
The Tribunal noted that the co-owners were assessed individually for Income Tax, with separate PAN numbers and TDS deductions. This individual assessment supported their eligibility for separate Service Tax exemptions. The Tribunal emphasized that Service Tax liability should be based on the value of services provided by each co-owner, not on the total rent received collectively.

Conclusion:
The Tribunal set aside the impugned orders and allowed the appeals, granting the co-owners the benefit of the Service Tax exemption under Notification No.6/2005-ST. The Tribunal found that the co-owners were not an association of persons and were eligible for individual exemptions based on their proportionate shares of rent received. The decision reinforced the principle that Service Tax should be levied on the value of services provided by each individual co-owner.