2018 (8) TMI 254 - AT - Service Tax

Renting of Immovable Property Service - appellants were renting out immovable properties such as commercial complexes, shops, etc., to private parties - principle of mutuality of interest - N/N. 06/2005-ST dt. 01.03.2005 was amended by N/N. 08/2008 - Held that - It is seen that for the period 2007-08, when the threshold limit was 8 lakhs, the rent received from non-members is only ₹ 3,36,180/-. Similarly, for the period from 2008-09 to 2010-11, the rent collected from non-members is less than ₹ 5 lakhs. It is very much clear that the amounts collected from non-members would fall below the threshold limit and the demand of service tax on this ground cannot sustain - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the appellants were liable to pay service tax under the category of "Renting of Immovable Property" for renting out properties to private parties.
2. Whether the principle of mutuality of interest applied to exempt the appellants from service tax on rent collected from members.
3. Whether the threshold limit under Notification No. 08/2008 applied to the amounts collected as rent from non-members.

Analysis:

1. The appellants were accused of not discharging service tax obligations for renting out properties. The adjudicating authority and the Commissioner (Appeals) upheld the demand. The Tribunal was approached by the appellants challenging the decision.

2. The appellant argued that as an association facilitating merchants, the rent collected from members was exempt from service tax due to the principle of mutuality of interest. Citing legal precedents like Ranchi Club Ltd. and Saturday Club Ltd., the appellant contended that no service tax liability existed on amounts collected from members.

3. Regarding rent from non-members, the appellant claimed the amounts fell below the threshold limit specified in Notification No. 08/2008. This argument was not considered by the Commissioner (Appeals). The Tribunal analyzed the rent collected from non-members and found that it indeed fell below the threshold limit, rendering the demand for service tax unsustainable.

4. The Tribunal agreed with the appellant's contentions, noting that the demand could not be sustained. Citing the legal position established in previous judgments and considering the threshold limits, the Tribunal set aside the impugned order, allowing the appeal with consequential reliefs.

In conclusion, the Tribunal ruled in favor of the appellant, exempting them from service tax on rent collected from members due to the principle of mutuality of interest and finding that the amounts collected from non-members were below the specified threshold limit, thereby setting aside the demand for service tax.