renting of co-owned property

[satbir singhwahi]

Property is co-owned with definite share and it is let out , rent is received individually with individual PAN and TDS.

Whether Service tax on Individuals or Joint coownership.

Department quoting Supreme court in the case of Raman Lal Bhai patel Vs. State of Gujarat 2008 (2) TMI 859 - Supreme Court Of India in civil appeal no. 4420 of 2004, in which to a question as to whether co-owners together are a person or not , the honourable SC in para 21 of the judgement has specifically held that '' if the co-owners proceed further and enter into an arrangement or agreement to have a joint enterprise or venture to produce a common result for their benefit , then the co-owners may answer the definition of person''

Pl guide .

[Ganeshan Kalyani]

Each invidiual owner receiving rent income is eligible to avail the basic threshold limit of ₹ 10 Lacs, though the property from which the income is generated is same. Thanks.

[CSSANJAY MALHOTRA]

Dear Mr. Wahi,

Would further add to Mr. Ganeshan views that threshold exemption of ₹ 10 Lacs would apply to each Individual.

No Doubt DGST has clarified vide their letter F.No. V/DGST/VIII-RIP3/139/2011-12/1202 dated 07.03.2013 vide Para 3.2 & Para 5 that "the shelter of threshold exemption can be taken only if the immoveable property is covered by a single title deed in favour of a single individual", but it can be taken as statutory guideline as the DGST clarifications can't overrule the Notifications & Circular.....

Do refer to the Citation in case as below, which would enable you to strengthen your view point across Tax officials.

Commissioner of Central Excise, Nasik versus Deoram Vishrambhai Patel - 2015 (9) TMI 790 - CESTAT MUMBAI

 

[satbir singhwahi]

THks Malhotra Ji

But how we reply to Dept View

" Department quoting Supreme court in the case of Raman Lal Bhai patel Vs. State of Gujarat 2008 (2) TMI 859 - Supreme Court Of India in civil appeal no. 4420 of 2004, in which to a question as to whether co-owners together are a person or not , the honourable SC in para 21 of the judgement has specifically held that '' if the co-owners proceed further and enter into an arrangement or agreement to have a joint enterprise or venture to produce a common result for their benefit , then the co-owners may answer the definition of person''

[CSSANJAY MALHOTRA]

Dear Mr. Wahi,

SC Judgement is not relevant in the present case as the facts are different. Coparceners depending upon the case to case basis can sign off Agreement as "Association of Persons" which is the case in the SC decision, but herein the Property belongs to various persons and they can sell off their share at any point of time. Hence the service can't be regarded as rendered in the capacity of "Association of Persons".

Citation quoted is sufficient as of now as the Notifications of Service Tax does not clearly specifies the Co-parceners treatment as "Association of Persons" for the payment orf Service Tax.

Hope above addresses your concern.

[KASTURI SETHI]

I support the views of Sh.Ganeshan Kalyani and Sh.C.S.Sanjay Malhotra, Sirs.

[satbir singhwahi]

Thks to all for your timely guidance.

AI Summary

Service tax treatment of rent from co-owned property depends on whether co-owners form a joint enterprise or act individually. Whether rent from a co-owned immovable property is treated for service tax as income of individual owners or as a joint activity depends on whether co-owners have entered an arrangement to pursue a common result. Practitioners advise that each co-owner receiving rent may avail the statutory threshold exemption individually. A DGST clarification linking threshold shelter to single-title ownership is noted but treated as subordinate to notifications and circulars. CESTAT authority is cited to support that taxable treatment turns on the factual existence of an agreement creating a joint enterprise rather than mere co-ownership.