Service tax clubbing of co-owned rent rejected where each co-owner was separately identifiable and exempt individually.

Separate leave and licence agreements executed by individual co-owners meant that each received rent only for his or her own share, so the receipts could not be clubbed by treating the co-owners as an association of persons for service tax purposes. Mere joint ownership did not by itself create an association of persons in law. Because each co-owner was separately identifiable as a service provider and each individual receipt fell below the small service provider exemption threshold, the exemption notifications applied separately to each co-owner. The demand based on aggregation of all co-owners' rent was therefore unsustainable, and the service tax demand was set aside.

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Issues: Whether rent received by individual co-owners of jointly owned property could be clubbed together by treating them as an association of persons for service tax purposes, and whether each co-owner was entitled to the small service provider exemption.

Analysis: The co-owners had entered into separate leave and licence agreements, and each received rent only in respect of his or her own share. Joint ownership of property by itself did not create an association of persons in law. Since each co-owner was separately identifiable as a service provider, the rent receipts could not be aggregated for the purpose of determining taxability. On the undisputed facts, the individual receipts of each co-owner were below the prescribed exemption threshold, and the exemption notifications applied to each of them separately.

Conclusion: The demand based on clubbing the rent of all co-owners was unsustainable, and the service tax demand was rightly set aside in favour of the assessees.

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