2023 (4) TMI 262 - AT - Service Tax

Joint property owners not collectively liable for service tax on individual rental income. Precedents cited.

Shri Akash Devendrakumar Sharma, Poonam Nageshkumar Sharma, Smt Sheeladevi Devendrakumar Sharma, Smt Laxmidevi Nareshkumar Sharma and Smt Chetnadevi Umashankar Sharma Versus Commissioner of Central Excise & ST, Ahmedabad

The Tribunal held that joint owners of a property, each receiving rent individually, are not liable to pay service tax collectively. The rental income of ... Levy of service tax - renting of property jointly owned by five persons - each appellant became an independent service provider in respect of renting of immovable property - whether appellants are liable to service tax by clubbing of all five persons or otherwise? - no legal entity like Body Corporate or Association of Persons - total rent falls below the threshold limit of exemption under Notification No. 6/2005-ST dated 01.05.2005 or not - HELD THAT:- Clubbing the property as co-owned by the persons, five appellants own equal share. All the appellants entered into lease agreement with Reliance Industries Limited and for this, each appellant became an independent service provider in respect of renting of immovable property. As per facts, there is no legal entity such as Association of Persons of Body Corporate, each person owns the property. As per lease agreement, every individual is independent owner of his share. The rent is also paid by the service recipient to each individual. In such case, every individual become a separate service provider hence, if at all service tax arises, it needs to be assessed in respect of every individual. Further, the rent received by the individual is well within the threshold limit provided for exemption under Notification No. 6/2005-ST dated 01.05.2005. Therefore, there is no service tax liability on any of the appellant. Identical issue has been considered by this Tribunal in the case of M/S NEENABEN R DOSHI, MANJU MUKESH GARG & GUNJAN PARVESH GARG, RITABEN PIYUSHKUMAR DOSHI, KISHORBHAI PRANJIVANDAS MANDALIA, VIPULKUMAR ZAVERILAL MANDALIA, PRANJIVANDAS MANDALIA, CHANDRESHBHAI ZAVERILAL MANDALIA, BHANUBEN PRANJIVANDAS MANDALIA, PRAFULLABEN ZAVERILAL MANDALIA, FENNY CHANDRESH MANDALIA, SMT. ARUNA KISHOR MANDALIA, SHRI SHEKHAR KANAIYALAL SHAH, BHANUBEN PRANJIVANDAS MANDALIA, DAKSHA BHARATKUMAR MANDALIA, MRUDULA KANAIYALAL SHAH, SUJATA SHEKHAR SHAH, HEMALI VIPUL MANDALIA, ZAVERILAL VIRJIBHAI MANDALIA VERSUS C.S.T. & S.T. - AHMEDABAD [2019 (5) TMI 1485 - CESTAT AHMEDABAD] where it was held that receipt of rental income by every individual is only subject to liability of service tax. If the value is below thresh-hold exemption limit in case of any individual, the same will not be taxable being exempted under Notification No. 06/05-ST dated 01.03.2005. At the same time in case of any individual person if the thresh-hold limit exceed in financial year, the same will be liable for service tax. The issue is no longer res-integra - Appeal allowed. Issues Involved:- Whether appellants are liable to service tax for renting of property jointly owned by five persons by clubbing all five persons or otherwise.Summary:1. Liability of Service Tax on Jointly Owned Property:The primary issue is whether the appellants, who jointly own a property, are liable to service tax by clubbing the rental income of all five individuals or should be assessed individually. The appellants argued that each of the five individuals, as per the lease agreement with Reliance Industries Limited, is paid a specific amount of rent and thus, each should be considered a separate service provider. They contended that there is no legal entity like a Body Corporate or Association of Persons, and therefore, the rent received by individuals should not be clubbed for service tax purposes. They also claimed that the total rent received by each individual falls below the threshold limit for exemption under Notification No. 6/2005-ST dated 01.05.2005, citing several precedents to support their case.2. Revenue's Argument:The Revenue, represented by Shri Vijay G Iyengar, Assistant Commissioner (AR), reiterated the findings of the impugned order, implying that the rental income should be clubbed and taxed collectively.3. Tribunal's Findings:The Tribunal carefully considered the submissions and reviewed the records. It found that each appellant owns an equal share of the property and entered into a lease agreement independently. The rent is paid to each individual separately, making each person an independent service provider. Therefore, any service tax liability should be assessed individually. The Tribunal referenced a similar case, Neenaben R Doshi & others, where it was held that joint owners are independent in respect of their ownership shares and rental income should be taxed individually. It was concluded that if the rent received by an individual is below the exemption threshold, no service tax is payable.4. Precedents Considered:The Tribunal cited several judgments, including:- Anita Singh, Pritam Singh, Prerna Singh vs. CGST, CC & CE, Dehradun.- Sarojben Khusalchand vs. CST, Ahmedabad.- CCEX, Nasik vs. Deoram Vishrambhai Patel.- A. Akila vs. CCE, Trichy.- Sanjay Kanaiyalal Motwani & Ors vs. CST, Ahmedabad.- Shri SV Janardhanam vs. Commissioner GST & CCE, Salem.- Shri Syed Ahamed & Ors vs. Commissioner GST & CE, Trichy.- CCEX & ST, Allahabad vs. Luxmi Chaurasia.5. Conclusion:The Tribunal concluded that the appellants are not liable to pay service tax as the rental income received by each individual falls below the exemption limit. The impugned orders were set aside, and the appeals were allowed with consequential relief as per law. The issue was deemed no longer res-integra.Pronouncement:The judgment was pronounced in the open court on 05.04.2023.