2019 (10) TMI 1140 - AAR - GST

Association of persons or a body of individuals - Total rental received exceeds the threshold provided under section 22(1) of the GST Act but the share of each of the three co-owners does not cross the said threshold - whether the applicant and the other two co-owners are to be treated as an association of persons or a body of individuals and therefore a person as defined under section 2(84)(f) of the GST Act who is required to be registered under section 22(1) of the Act? HELD THAT - Section 26 of the Income Tax Act 1961 prohibits the assessment of the co-owners of a property consisting of buildings or buildings and land appurtenant thereto as an association of individuals if their respective shares in the property are definite and ascertainable. Shares of each such persons in the income from the property as computed in accordance with sections 22 to 25 shall be included in his total income - Section 3(42) of the General Clauses Act 1897 defines the term person for itself and for all Central Acts and Regulations to be made thereafter unless there is anything repugnant in the subject or context. It defines a person to include any company or body of individuals whether incorporated or not. The issue involved in all these appeals is that the appellants are co-owners of their properties leased out to tenants. The properties are jointly held and the rental received is assessed under the Income Tax Act 1961 separately for each co-owner. The Applicant along with the other co-owners jointly owned an immovable property and rented it out to the central authority after executing a contract jointly to that effect. Each of the co-owners receives the rental proportionate to his share in the immovable property and the income tax authority assesses him separately on the income so received. Although the co-owners have jointly executed the contract and the service of renting the property cannot be supplied separately by any of the co-owners it appears there is a judicial unanimity against treating the co-owners as an association of persons for taxation where their income from renting is separately ascertainable and assessed for income tax individually at the hand of each co-owner. The co-owners of a jointly held immovable property cannot be treated as an association of persons for determining the liability and requirement of registration under the GST Act where their income from renting is separately ascertainable and assessed for income tax individually at the hand of each co-owner.

Summary

Issues:
1. Admissibility of the Application
2. Submissions of the Applicant
3. Observations & findings of the Authority

Admissibility of the Application:
The Applicant, one of the co-owners of an immovable property, sought clarification on being treated as an association of persons or a body of individuals under the GST Act. The central authority clarified that the co-owners should be considered as a person as per the Act. The Authority admitted the Application, treating the Applicant as an unregistered person due to the central authority's clarification, exempting the Applicant from administrative jurisdiction.

Submissions of the Applicant:
The Applicant argued that joint ownership of property does not automatically constitute an association of persons. Referring to legal precedents and Income Tax Act interpretations, the Applicant contended that individual assessment for income tax does not imply association for tax purposes. The Applicant highlighted judicial rulings on service tax issues related to joint property ownership, emphasizing that individual earnings should be considered for threshold exemptions.

Observations & Findings of the Authority:
The Authority analyzed the central authority's clarification and legal interpretations related to associations of persons. It discussed the applicability of Income Tax Act provisions and General Clauses Act definitions to the case. The Authority reviewed Tribunal decisions on similar cases and concluded that joint property owners should not be treated as an association of persons for GST liability if their incomes are individually assessed. The ruling stated that registration under the GST Act depends on individual gross turnover exceeding the threshold.

The Authority's detailed analysis covered the admissibility of the Application, the Applicant's submissions regarding joint property ownership, and the legal observations leading to the final ruling. The judgment clarified the treatment of co-owners under the GST Act, emphasizing individual income assessments for determining liability and registration requirements.