Separate taxation of co-owner rent receipts: service tax exemption threshold applies individually absent proof of an association of persons.

Where co-owners of rented immovable property receive rent separately in proportion to their individual shares, the small-scale exemption under Notification No. 6/2005-S.T. must be applied separately to each co-owner's receipts. Service tax cannot be demanded by clubbing the rent unless the Department establishes that the co-owners constitute an association of persons or another single taxable entity. On the stated facts, separate receipt of rent and separate TDS deductions supported individual assessment, and the clubbing approach was held unsustainable.

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Issues: Whether the co-owners of the rented property were individually entitled to the small-scale exemption under Notification No. 6/2005-S.T. on their respective shares of rent, and whether service tax could be demanded by treating them as one taxable entity or association of persons.

Analysis: The rent was received separately by each co-owner, the ownership of the premises was joint, and the Department did not dispute separate receipt or separate TDS deduction in the names of the individual co-owners. In such circumstances, the taxable activity had to be assessed in the hands of each co-owner according to his or her individual rental receipts. The Department failed to establish that the co-owners constituted an association of persons or any other single taxable entity. The issue was already covered by earlier Tribunal decisions holding that co-owners of immovable property are not to be clubbed for service tax purposes where receipts are individual and the exemption threshold is tested separately for each co-owner.

Conclusion: The co-owners were individually entitled to the exemption on their respective shares, and the demand based on clubbing of rent was unsustainable.

Final Conclusion: The impugned orders were set aside and the appeals were allowed with consequential relief according to law.

Ratio Decidendi: Where co-owners of immovable property receive rent separately in proportion to their individual shares and no association of persons is established, service tax exemption thresholds must be applied separately to each co-owner rather than by clubbing the rental receipts.

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