2018 (10) TMI 401 - AT - Service Tax

Renting of immovable property Service - inherited property - SSI Exemption - Association of persons - Held that - The demand has been raised on all the co-owners to treat them as association of person and levy service tax on the amount of rent received by them. When the co-owners are treated individually, the amounts undoubtedly fall below the threshold exemption. The Tribunal in the case of Sarojben Khulsanchand & Ors. Vs. Commissioner of Service Tax, Ahmedabad 2017 (5) TMI 240 - CESTAT AHMEDABAD , had considered the similar issue and 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. The demand cannot sustain and requires to be set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the demand for service tax on co-owners as an association of persons is valid?
2. Whether the rent received by individual co-owners crosses the threshold limit for service tax liability?
3. Whether the property being indivisible affects the levy of service tax on total rent received?

Analysis:

Issue 1:
The case involved a demand for service tax on all co-owners treated as an association of persons. The Tribunal considered the argument that individual co-owners should not be considered an association of persons for service tax purposes. The Tribunal highlighted that the concept of 'association of persons' is distinct under the Income Tax Act, and the Service Tax Registration is PAN-based. The Tribunal emphasized that collecting service tax from one co-owner based on the total rent received by all co-owners separately is not supported by law or procedure. The Tribunal ruled that all co-owners providing the service of renting of immovable property should not be treated as an association of persons for service tax liability.

Issue 2:
The appellants argued that the rent received by each individual co-owner was below the threshold limit for service tax liability. They contended that when the co-owners are treated individually, the amounts fall below the exemption limit. The Tribunal referred to previous decisions and observed that the rent received by each co-owner individually did not cross the threshold limit. The Tribunal cited cases where similar issues were decided in favor of the assessees, emphasizing that the demand for service tax cannot be sustained if the rent received by individual co-owners is below the threshold limit.

Issue 3:
Regarding the argument that the property being indivisible affects the levy of service tax on total rent received, the Tribunal rejected this notion. The Tribunal clarified that service tax is levied on the service provided, which is intangible, and does not require physical demarcation of the immovable property against individual co-owners. The Tribunal emphasized that once the value of service provided is ascertainable, service tax is charged accordingly. The Tribunal referred to previous cases where the benefit of exemption was allowed to individual co-owners who jointly owned the property and provided the service of renting of immovable property.

In conclusion, the Tribunal set aside the impugned order, ruling in favor of the appellants based on the arguments presented and previous decisions.