Renting service tax must follow the actual rent recipient; co-owners' separate receipts cannot be clubbed for threshold exemption.

Service tax on renting of immovable property was held assessable with reference to the person who actually received the rent. Where jointly owned property generated rent that was separately credited to individual co-owners, liability could not be fastened on the partnership firm that did not receive the consideration. The threshold exemption under Notification No. 06/2005-ST also had to be tested co-owner-wise, and clubbing the separate receipts of all co-owners was impermissible. Each co-owner was entitled to be examined independently for exemption, so receipts below the limit could not be denied the notification benefit.

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Issues: (i) Whether service tax on renting of immovable property was payable by the partnership firm when the rent from jointly owned property was directly received by the co-owners in their individual accounts. (ii) Whether the benefit of Notification No. 06/2005-ST dated 01.03.2005 could be denied by clubbing the rent received by all co-owners for the purpose of the threshold exemption.

Issue (i): Whether service tax on renting of immovable property was payable by the partnership firm when the rent from jointly owned property was directly received by the co-owners in their individual accounts.

Analysis: The rent was received directly by the individual co-owners and not by the partnership firm. The tax incidence under the service tax regime attaches to the person who receives consideration for the taxable service. Where co-owners receive rent separately in proportion to their respective shares, each co-owner is to be treated as an independent assessee for tax purposes, and the liability cannot be fastened on an entity that did not receive the rent.

Conclusion: The service tax demand against the partnership firm was unsustainable, as it was not the recipient of the rent.

Issue (ii): Whether the benefit of Notification No. 06/2005-ST dated 01.03.2005 could be denied by clubbing the rent received by all co-owners for the purpose of the threshold exemption.

Analysis: The threshold exemption has to be examined with reference to the receipts of each individual co-owner. Clubbing the rent of all co-owners merely because the property was jointly owned is impermissible when the receipts are separately credited and the legal liability is individual. If the rent received by a co-owner remains below the exemption limit, that co-owner is entitled to the benefit of the notification.

Conclusion: The exemption could not be denied by aggregating the individual receipts of the co-owners.

Final Conclusion: The demand was set aside because liability could not be imposed on the appellant firm for rent not received by it, and the individual co-owners' receipts were entitled to be tested separately for exemption.

Ratio Decidendi: In respect of jointly owned property, service tax on renting of immovable property is to be assessed with reference to the actual recipient of rent, and the threshold exemption cannot be denied by clubbing the separate receipts of individual co-owners.

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