2019 (7) TMI 1479 - AT - Service Tax

Claim of small scale exemption upto ₹ 10 Lakhs - Association of persons - benefit of exemption to each co-owner - N/N. 6/2005-ST, dt.1.3.2005 as amended - Renting of Immovable Property service - period October 2007 to March 2012 - HELD THAT - In the present case, risks and rewards are not shared as each of the co-owner brought money from their own sources to buy properties and they are receiving rents separately. In the case of Sarobjen Khusalchand Others vs. CST 2017 (5) TMI 240 - CESTAT AHMEDABAD , CESTAT, Ahmedabad has concluded that the threshold exemption is available for each individual co-owner. Appeal dismissed - decided against Revenue.

Summary

Issues:
- Interpretation of joint ownership in the context of service tax liability
- Applicability of small service provider exemption to individual co-owners
- Whether joint owners constitute an association of persons for service tax purposes

Analysis:

1. Interpretation of Joint Ownership: The case involved joint owners of properties providing taxable services of 'Renting of Immovable Property' without discharging tax or filing returns. The Revenue alleged tax evasion and issued a show cause notice. The original authority confirmed the tax demand, interest, and penalties. The Commissioner (Appeals) later allowed the appeal of the assessee, leading to the Revenue's appeal before the Tribunal.

2. Small Service Provider Exemption: The Revenue argued that the joint service provided by the owners constituted an association of persons, making the small service provider exemption inapplicable to each individual. They contended that the joint owners were engaged in a common enterprise of renting properties for income. However, the respondent's consultant cited various Tribunal decisions in favor of the assessee, emphasizing that joint owners merely shared rental income based on individual ownership shares, not engaging in a common income-producing activity.

3. Association of Persons for Service Tax Purposes: The Tribunal examined whether the joint owners' arrangement constituted an association of persons for service tax purposes. After considering submissions and precedent cases, the Tribunal found that each co-owner independently bought properties, received rents proportionate to their share, and did not exceed the threshold limit for service tax liability. The Tribunal upheld the Commissioner (Appeals) decision, citing relevant case law and emphasizing that joint receipt of income does not necessarily imply a joint enterprise for tax purposes.

4. Legal Precedents and Decisions: The Tribunal referenced various decisions, including those of the Hon'ble Apex Court and High Courts, to support its conclusion that the threshold exemption applied to each individual co-owner. They highlighted that risks and rewards were not shared among co-owners, and income was accrued individually. The Tribunal also noted that the mere joint receipt of income did not establish a joint enterprise for tax liability.

5. Final Decision: After thorough analysis and considering all arguments, the Tribunal found no infirmity in the Commissioner (Appeals) order. They dismissed all appeals of the Revenue, upholding the decision in favor of the joint owners. The impugned order was upheld, and all six appeals filed by the Revenue were dismissed.

In conclusion, the Tribunal's judgment clarified the interpretation of joint ownership in the context of service tax liability, emphasizing the individual nature of income accrual and the lack of shared risks/rewards among co-owners. The decision provided clarity on the applicability of the small service provider exemption to individual co-owners and established that joint receipt of income does not automatically constitute an association of persons for service tax purposes.