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TMI Blog2024 (7) TMI 1573X X X X Extracts X X X X X X X X Extracts X X X X ..... 008, therefore service tax demand will not sustain. This issue has been considered time and again in various judgements - reliance can be placed in Sarojben Khushalchand versus Commissioner of Service Tax, Ahmedabad [ 2017 (5) TMI 240 - CESTAT AHMEDABAD ] where it was held that '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'. It is found that the ground of appeals stated by Revenue in the said appeal is before me are only about what constitutes association of persons . There are no ground which establishes that the eight individuals who are respondents can be called association of persons through any definition provided by any law, when they have not entered into any agreement to form association of persons . Even the definition of person in Section 3(42) of the General Clauses Act, 1897 states that person shall include any company or association or body of individuals. So, since the definition is inclusive, there has to be an association of individuals to bec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere is no dispute that the immovable property is co-owned by both the appellants and the rent was received from Punjab National Bank (lessee) equally to both the co-owners. In this fact, both the co-owners are to be treated as independent service provider. Therefore, individually each appellant received rent for the financial year involved in the entire period of this case is much below the threshold limit of exemption under Notification Nos. 6/2005-ST dated 01.03.2005 and No. 8/2008-ST dated 01.03.2008, therefore service tax demand will not sustain. This issue has been considered time and again in the following judgments:- (a) Sarojben Khushalchand versus Commissioner of Service Tax, Ahmedabad 6. We find that the limited question of law which needs to be addressed is : 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 Notification No. 6/2005-S.T., dt. 1-3- 2005, as amended, separately. The relevant notification reads as follows :- Service Tax exemption when value of taxable service provided not exceeds Rs. 4 l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of such inputs lying in stock or in process on the date on which the provider of taxable service starts availing exemption under this notification; (vi) the balance of Cenvat credit lying unutilised in the account of the taxable service provider after deducting the amount referred to in sub-paragraph (v), if any, shall not be utilised in terms of provision under sub-rule (4) of rule 3 of the said rules and shall lapse on the day such service provider starts availing the exemption under this notification; (vii) where a taxable service provider provides one or more taxable services from one or more premises, the exemption under this notification shall apply to the aggregate value of all such taxable services and from all such premises and not separately for each premises or each services; and (viii) the aggregate value of taxable services rendered by a provider of taxable service from one or more premises, does not exceed rupees four lakhs in the preceding financial year. 3. For the purposes of determining aggregate value not exceeding four lakh rupees, to avail exemption under this notification, in relation to taxable service provided by a goods transport agency, the pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orporated or not should be pressed into service to levy Service Tax on the total rent received by all co-owners considering them as body of individual or association of persons in computing the gross taxable value under the exemption Notification No. 6/2005-S.T. The appellants on the other hand, vehemently argued that the definition of person provided under the General Clauses Act, is not relevant and inapplicable to the facts and circumstances of the present case, inasmuch as merely because several persons own the immovable property jointly, they cannot be treated as body of individuals or association of persons, when each co-owner receive the rent proportionate to their share in the immovable property, having separate PAN No. and subjected to TDS and income tax assessment separately. In support of their argument on the scope and meaning of association of persons they have referred to the judgment of Hon ble Supreme Court in the case of CIT v. Indira Balkrishna (supra) followed in Deghamwala Estates (supra) case where under similar circumstances, the co-owners who received the rent income proportionate to their share had been assessed to income tax separately, but not as an associ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s which occurred previously in the section should be read ejusdem generis with the word immediately preceding, viz. firm, or with all the other groups of persons mentioned in the section. Into that controversy it is unnecessary to enter in the present case. Nor do we pause to consider the widely differing characteristics of the three other associations mentioned in the section, viz. Hindu undivided family, a company and a firm, and whether in view of the amendments made in 1939 the words in question can be read ejusdem generis with Hindu undivided family or company. It is enough for our purpose to refer to three decisions : In re B.N. Elia; Commissioner of Income-tax v. Laxmidas Devidas; and In re Dwarkanath Harischandra Pitale. In re B.N. Elias Derbyshire, C.J. rightly pointed out that the word associate means, according to the Oxford Dictionary, to join common purpose, or to join in action. Therefore, an association of persons must be one in which two or more persons join a common purpose or common action, and as the words occur in a section which imposes a tax on income, the association must be one of the object of which is to produce income, profits or gains. This was the view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... separate legal entity under the Income-tax Act for assessment and provided separate PAN number different from the PAN number possessed by individual co-owners; who joined together to form an association of persons . In the present case, the show cause notices were issued in many cases to one person among the Joint owners and in other cases to all the persons who had jointly owned the immovable property provided on rent. Needless to mention, 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. Another argument of the Revenue is that since the property is indivisible and not earmarked against each of the co-owners, hence the Service Tax is leviable on the total rent re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epartment from the appellants by clubbing the rent received by all the co-owners and, therefore, the demand off tax is not maintainable on this ground alone. In support they have produced a City Survey Extract as evidence regarding ownership of the rented property which shows that the said property was purchased in 2003 and is owned jointly by all the four co-owners. Further, the lease agreements with M/s. Max New York Life Insurance Co. Ltd., Oriental Bank of Commerce, Axis Bank, Kotak Mahindra Bank and HDFC Standard Life Insurance Ltd. are also entered into by the appellants in their individual capacity, as per SCN also, all four co-owners have obtained separate Registration Certificate on 10-4-2012 and all the four co-owners individually paid their Service tax liability along with interest on 14-2-2012. Thus, the ownership of the Property and providing of taxable renting of immovable Property by the four appellants in this case is in their individual capacity and, therefore, their tax liability should have been determined by considering their individual rental receipts and not collective one. From the various lease agreements made with above mentioned Commercial firms, it cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion or any Inspection etc. on the basis of which not payment of service tax by the appellants was pointed out. Instead in the SCN, one statement of Shri Chandulal Vishrambhai Patel is only referred to which was recorded on 22-2-2012 which is 8 days after the appellants had paid service tax along with interest on their own. Thus, the claim of the appellant that they had paid service tax for the years 2009-10 and 2010-11 on their own initiative and there was no suppression of facts etc. on their part with any intention to evade service tax cannot be denied. Considering all these facts, I agree with the appellant s contention that this case was squarely covered under sub-section (3) of Section 73 which provided not to issue any notice under sub-section (1) of Section 73 if the service tax not levied or paid was paid along with interest by the person concerned before service of notice on him and informed the Central Excise Officer of such payment in writing. Further in Explanation 2 of the said sub section it is also clearly provided that no penalty under any of the provisions of the Act or the Rules made thereunder shall be imposed in respect of payment of service tax under this sub-s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontentions, I find that the ground of appeals stated by Revenue in the said appeal is before me are only about what constitutes association of persons . I cannot find any ground which establishes that the eight individuals who are respondents can be called association of persons through any definition provided by any law, when they have not entered into any agreement to form association of persons . Even the definition of person in Section 3(42) of the General Clauses Act, 1897 states that person shall include any company or association or body of individuals. So, since the definition is inclusive, there has to be an association of individuals to become person under said Section 3(42) of the General Clauses Act, 1897. Therefore, I do not find any sustainable ground advanced by Revenue in the present appeal. In view of the same I dismiss all the eight appeals filed by Revenue and hold that the respondents shall be entitled for consequential relief, if any, in accordance with law. 5. In view of the above decisions, the issue is no longer res-integra. Accordingly, the impugned order is set-aside and the appeal is allowed. (Pronounced in the open court on 16.07.2024) - - TaxTMI - T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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