While allowing the service tax exemption, the Ahmedabad Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that co-owners holding immovable property are treated as independent service providers. It was viewed that the rent received by individuals owning property jointly cannot be clubbed to impose service tax.
Shri Kamleshkumar K Kotecha, the appellants is co-owner of a building situated at Jawahar Road, Rajkot. They had given the said immovable property on lease to Punjab National Bank. The total rent received for the period 2008-09 to 2012-13 jointly by them amounts to Rs. 53,49,086/- in aggregate.
A show cause notice came to be issued demanding service tax of Rs. 5,29,509/- payable on the aggregate amount of sum total of rent received by them in regard to the said co-owned property aggregating to Rs. 53,49,086/-. The appellant challenged the order by the Adjudicating Authority. The appeal filed before the Commissioner (Appeals) was rejected.
Shri D.K. Trivedi, lcounsel appearing on behalf of the appellant at the outset submits that the amount of rent received individually for one financial year is much below the threshold limit of exemption as per Notification No. 6/2005-ST dated 01.03.2005 as amended vide Notification No. 8/2008-ST dated 01.03.2008. It is his submission that each individual out of both the co-owners has to be considered as individual service provider and therefore, their portion of rent received being within the threshold limit of exemption, service tax liability is not sustainable.
The issue was whether each of the co-owners, holding immovable property jointly but receiving the lease rent separately in proportion to the share in the property, is eligible to benefit from the threshold exemption limit as prescribed under Notification No. 6/2005-S.T., dt. 1-3-2005, as amended, separately.
It was observed that the Notification No. 6/2005-S.T., dated 1/3/2005, stated that the service tax exemption applies when the value of taxable service provided does not exceed Rs. 4 lakhs in a financial year.
A two member bench of the Mr Ramesh Nair, Member (Judicial) and Mr C L Mahar, Member (Technical) relied in the case of Sarojben Khushalchand versus Commissioner of Service Tax, where it was held that the rent received by individuals owning property jointly cannot be clubbed to impose service tax.
It was observed that ‘association of persons’ has been considered a separate legal entity under the Income-tax Act for assessment and provided a separate PAN number different from the PAN number possessed by individual co-owners who joined together to form an ‘association of persons’.
The Tribunal viewed that “Service tax is levied on the service provided, which is an intangible thing, and hence it is not necessary to be identified with the physical demarcation of the immovable property given on rent against individual co-owners. Once the value of the service provided by a service provider is ascertainable, service tax is accordingly charged.” While allowing the appeal, the CESTAT set aside the impugned order.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
