Individual exemption for co-owners' rental income prevents clubbing receipts into one taxable service tax base.

Co-owners of immovable property receiving rent in proportion to their respective shares could not be treated as an association of persons for service tax purposes. The service tax liability had to be examined against the rental income attributable to each co-owner individually, and where each share remained below the small scale exemption threshold, the exemption applied on a separate basis. Joint ownership alone did not justify clubbing the receipts into one taxable value or fastening a combined demand on all co-owners.

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Issues: Whether the rental income received by co-owners of an immovable property could be clubbed by treating them as an association of persons for levy of service tax, and whether each co-owner was entitled to individual small scale exemption on the rent attributable to his or her share.

Analysis: The rental receipts were received by the co-owners in their respective shares, and the share of each co-owner, when taken separately, remained below the relevant threshold under the small scale exemption notification. The liability could not be fastened by aggregating the rent of all co-owners as if they constituted one taxable entity. Service tax is levied on the service value attributable to the individual service provider, and the fact that the property was jointly owned did not justify clubbing the receipts into a single assessable value for all co-owners.

Conclusion: The co-owners could not be treated as an association of persons for the purpose of combining rental income, and the demand of service tax was not sustainable. The assessee was entitled to the benefit of the exemption on an individual basis.

Ratio Decidendi: Joint owners who receive rent in proportion to their shares cannot be clubbed as a single taxable unit for service tax where each individual receipt falls within the exemption threshold.

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