TaxTMI 
TaxTMI 
TaxTMI 
2026 (1) TMI 1161
X X X X Extracts X X X X
X X X X Extracts X X X X
....ave provided taxable service under 'Renting of Immovable Property Service' as per section 65(105)(zzzz) of the Finance Act, 1994 read with Section 65(90a) of the Act and the provisions of Section 65(B)(41). The appellants have paid Service Tax under the category of 'Renting of Immovable Property Service' in their individual capacities as per their share in the properties whenever the threshold limit for exemption has been exceeded. 2.2 It is the department's contention that but for the co-owners acting together to rent the property for earning income no provision of service is possible to be provided since the share of each co-owner is not demarcated. Only when the co-owners join as an association or as a team or a body, it appears that the service provided comes into existence. Hence the co-owners would collectively constitute a single entity as an "association or body of individuals" who are collectively liable to pay service tax after pooling the entire consideration received. Hence, the department issued Show Cause Notices on the ground that the co-owners being an 'association of persons' ought to have taken a registration as a single entity separately and discharged the ser....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Wing of the former Service Tax Commissionerate it was found that a portion of the property known as 'Prashant Real Gold Tower' in T. Nagar, Chennai was jointly owned by the appellants-Smt. Salma Sayeed, Shri Rehan Sayeed, Smt. Naushin Desai, and Shri Sameer Faisal Desai-and had been leased for monthly rent, vide lease deed dated 24.01.2007 by the developers to M/s. Joy Alukkas Traders (I) Pvt. Ltd. Each of the individual Co-owners were receiving his share of the rent, which is proportionate to his share in the property, through separate Account Payee cheques. The rent received was within the basic exemption limit of Rs. 10,00,000 and wherever the Appellants crossed the basic exemption, they have registered and paid service tax for the period from 2015-2016. The investigation revealed that the indivisible service classified under renting of immovable property was provided collectively by all appellants as an 'Association of Individuals.' However Service Tax had not been paid by the appellants under 'Renting of Immovable Property' for business or commercial purposes Following due legal process, the Learned Adjudicating Authority denied exemption under Notification No.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....an 'association of persons' liable to be assessed as a single entity, the co-owners should have joined their resources and acquired the property in the name of the Association which did not happen in the present case. D) That TDS has been deducted in the hands of individuals; E) That unless there is a provision for a deeming fiction, it cannot be deemed that the co-owners are an Association; and F) That the co-owners were entitled to avail the benefit of Notification No.6/2005 to claim threshold exemption where their individual turnover was less than Rs. 10,00,000/-. G) She placed reliance on the following decisions in the appellants favour: i) P. Dhanalakshmi Vs. Commissioner of GST & CE 2020 (33) G.S.T.L. 225 (Tri. - Chennai) ii) Ramesh Kumar Chaudhary Vs. CST (2025) 26 Centax 147 (Tri.-Chan); iii) Sarojben Khusalchand Vs. CST 2017 (4) G.S.T.L. 159 (Tri.Ahmd); iv) CCE Vs. Deoram Vishrambhai Patel 2015 (40) STR 1146 H) The Show Cause Notice is time-barred as none of the ingredients that are required for invoking the extended period of 5 years are present. She hence prayed that the appeals may be al....
X X X X Extracts X X X X
X X X X Extracts X X X X
....any activity carried out by a person for another for consideration and includes a declared service. Further as per Section 65B(37), the term "person" was defined to include an association of persons or body of individuals, whether incorporated or not. (For ease of discussion, we refer to the term 'association of persons' only). None of these Acts, however, define what constitutes an 'association of persons'. This set the context for the demand of duty by the department from co-owners of rented commercial property as an "association of persons", resulting in the lis. 9. Joint ownership or co-ownership of property plays a critical role in defining how property is held, managed, and transferred between multiple individuals in India. It can arise in various social contexts, such as inheritance, purchase of property by more than one person say husband and wife, or as part of family arrangements or with a view to resolving disputes etc. These peculiar arrangements are generally made in the social context of maintaining peace and security of the family, entails rights, responsibilities, and individual interests of each co-owner in the property, and tax laws must be interpreted in this ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....an 'association of persons' does not mean any and every combination of individuals. This issue was examined by the Hon'ble Supreme Court in its landmark three Judge Bench judgment in Commissioner Of Income-Tax, Bombay Vs Smt. Indira Balkrishna [1960 AIR SC 1172, 1960 SCR (3) 513]. The Court held: "We now come to the main question in this appeal. What constitutes an " association of persons " within the meaning of the Income-tax Act ? It has been repeatedly pointed out that the Act does not define what constitutes an association of persons, which under s. 3 of the Act is an entity or unit of assessment. *****. *****. ***** It is enough for our purpose to refer to three decisions: In re: B. N. Elias and Others [[1935] I.T.R. 408]; Commissioner of Income-tax, Bombay Vs Laxmidas Devidas and Another [[1937] 5 I.T.R. 484]; and In re: Dwarakanath Harishchandra Pitale and Another [[1937] 5, I.T.R. 716]; In In re: B. N. Elias and Others, Derbyshire, C. J., rightly pointed out that the word "associate" means, according to the Oxford dictionary, "to join in common purpose, or to join in an action." Therefore, an association of persons must be one in which two or more pers....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ase of receiving dividends from shares, where there is no question of any management, it is difficult to draw an inference that two or more shareholders function as an association of persons from the mere fact that they jointly own one or more shares, and jointly receive the dividends declared. Those circumstances do not by themselves go to show that they acted as an association of persons." (emphasis added) 12. The above judgments delineates the legal prerequisites for the formation of an association of persons. Firstly, there must be a meeting of the minds. An association can only arise when individuals voluntarily unite with a shared objective, particularly the generation of income. The formation of an association of persons depends fundamentally on the volition of the parties. There must be jointness of individuals by volition. This union must result from a conscious and consensual agreement and not from automatic or incidental circumstances. Secondly joint management of the property for purpose of rent must be involved. The existence of co-owned property alone-such as in cases of inheritance where ownership is determined by law-does not constitute an association of perso....