TaxTMI 
TaxTMI 
2026 (3) TMI 655
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....h Section 65(90a) of the Finance Act, 1994 and the provisions of Section 65(B)(41) ibid. It is alleged that they neither obtained service tax registration nor paid service tax or filed returns for the period from 1.4.2009 to 31.3.2014. Upon investigation and scrutiny of records by the department, it was found that service tax liabilities had not been discharged. Accordingly, a Show Cause Notice dated 17.10.2014 was issued demanding service tax of Rs.20,24,579 along with interest and penalties. The Adjudicating Authority confirmed the demand with interest and imposed penalties under Sections 77 and 78. On appeal, the Commissioner (Appeals) partly allowed the appeals, leading to the present proceedings. 3. The Ld. consultant Shri R. Balagopal appeared for the appellants and Ld. Authorized Representative Shri M. Selvakumar appeared for the respondent. 3.1 Shri R. Balagopal the learned Consultant for the appellants submitted that; A) The appellants are joint owners of a commercial property, which was let out for commercial purposes. Each co-owner received one-third of the rental income by cheque after deduction of TDS during the period 2009-10 to 2013-14, disclosed only ....
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....He hence prayed that the appeal may be rejected. 4. We have heard the parties and examined the appeals. The issue is whether joint owners of a commercial property should be assessed individually with separate slab exemptions, or collectively as an 'association of persons' without such exemption. 5. We find that a similar matter was considered by this Bench in the case of Naresh Gopaldas Lund and Ors Vs Commissioner of GST & Central Excise, Coimbatore [2026 (1) TMI 1161 - CESTAT CHENNAI/FINAL ORDER NOS. 40116-40122/2026, Dated: 21.01.2026]. It was held as under: "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 ....
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.... 11. It can safely be said that 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 p....
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.... of persons if his lawful guardian gives his consent. In the case 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 ....
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....tely to each co-owner, with ownership shares being distinct and identifiable, and lease payments having accrued directly to each co-owner rather than to any collective entity or association. This indicates the absence of the essential element of volition required for the formation of an association of persons. Additionally, there is no evidence to suggest joint management of the property by the co-owners. The resulting confirmation of demand appears to reflect this dilemma faced by the Ld. A.A., as evidenced by the order portion of the OIO, which arbitrarily holds one noticee liable for the tax dues but states: "However, any of them (other noticees) is free to contribute towards payment of tax, interest and penalty more than his/her own liability on behalf of others and the same would be appreciated as well." 14. In light of these observations, it can be concluded that the individual appellants are entitled to be assessed separately for Service Tax in respect of their respective shares of rental income from the property. Our views are further strengthened by the judgment of the Hon'ble Andhra Pradesh High Court in Bolla Tirapanna and Sons Vs CIT [(1969) 71 ITR 209]. It was....