2020 (3) TMI 748 - AT - Service Tax

Co-owners' Rent Determines Service Tax: Individual Assessments Required

Smt. Uma Sanjay, V. Sharmila, S.R. Devarajan, R. Venugopal, D. Ramprakash Versus Commissioner of Central Excise and Service Tax

The Tribunal ruled that service tax on renting of immovable property services should be assessed based on the rent received by individual co-owners, not ... Renting of immovable property services - appellants are co-owners of immovable property which was leased out to customers - Demand of service tax - HELD THAT:- This Bench of the Tribunal in a batch of appeals viz. SMT. RAJESWARI, SHRI. M. BABU, SHRI. M. VIJAYKUMAR, SMT. V. SHARMILA, SHRI. R. VENUGOPAL, SHRI. S.R. DEVARAJAN, SMT. UMA SANJAY, SHRI. D. RAM PRAKASH, SHRI. S.V. JANARDHANAN, SHRI. B. RANGARAJAN, SMT. PARVATHI KRISHNARAJ, SHRI. E. JOHN DINAKAR, SMT. E. SUGANTHI JOY, SMT. SUGANTHI JOY EDWIN VERSUS THE COMMISSIONER OF G.S.T. & CENTRAL EXCISE, COIMBATORE, SALEM, MADURAI [2019 (2) TMI 862 - CESTAT CHENNAI] had considered the very same issue as to whether rent received by co-owners can be clubbed together to demand service tax. The Tribunal in the said order had relied upon the decision in the case of SAROJBEN KHUSALCHAND & OTHERS VERSUS C.S.T. -SERVICE TAX - AHMEDABAD [2017 (5) TMI 240 - CESTAT AHMEDABAD] and allowed the benefit of exemption notification no.6/2005-ST dt. 1.3.2005 to the individual co-owners who jointly owned the property and provided the service of renting of immovable property. It was held that service tax is leviable only in proportion to the rent received by each of the co-owners. The Tribunal in the said case had remanded the matter to the adjudicating authority to consider the plea of allowing the benefit of exemption N/N. 6/2005 as amended and to look into threshold limit of co-owners. The matter has to be remanded to the adjudicating authority who is directed to look into the discussions made in the Tribunal’s final order in the case of Smt. Rajeswari & others, and consider whether the appellants are eligible for the threshold exemption - Appeal allowed by way of remand. Issues:Interpretation of service tax liability on renting of immovable property services for co-owners.Analysis:The case involved co-owners of an immovable property facing a demand for service tax under renting of immovable property services. The original authority and Commissioner (Appeals) confirmed the demand, interest, and penalty. The appellant argued that each co-owner's rent is below the threshold limit, making them not liable to pay any service tax. The Tribunal referred to a previous case where it was held that service tax should be levied proportionately on the rent received by each co-owner. The Tribunal emphasized that co-owners should not be treated as an association of persons for service tax purposes. The Tribunal noted that each co-owner had a separate PAN number and was subject to individual tax assessments, supporting the argument against clubbing the rent together for service tax calculation. The Revenue's argument that service tax should be levied on the total rent due to the property being indivisible was rejected by the Tribunal. The Tribunal directed the adjudicating authority to consider the exemption notification and threshold limit for the co-owners, remanding the matter for further assessment.In conclusion, the Tribunal's decision highlighted the importance of assessing service tax on renting of immovable property services based on the rent received by individual co-owners rather than clubbing it together. The case emphasized the individuality of co-owners for tax purposes and rejected the notion of treating them as an association of persons. The Tribunal's ruling provided clarity on the calculation of service tax liability for co-owners of immovable property, ensuring a fair and proportionate assessment based on each co-owner's share of rent received.