The Ahmedabad bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) held that co-owners of a property cannot be treated as an “Association of Persons” (AOP) and quashed a service tax demand on rent receipts.
In this case, the appellants, who were the co-owners of a commercial property, rented it to M/s. Astron Research Limited for office purposes, and each of the co-owners was paid their separate share of rent, which was less than 10 lakhs for a year.
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The department was of the opinion that the co-owners should be considered as an AOP, and the total rent received by all co-owners should be clubbed together for the purpose of levying service tax under the “renting of immovable property” category. The department argued that since the property was jointly owned, the co-owners formed a single entity, and the total rent was paid by M/s. Astron Research Limited should be subject to service tax.
Cestat noted that each co-owner had entered into a separate leave and license agreement with M/s. Astron Research Limited, and each individual received rent independently, and the rent received by each co-owner was below the threshold limit of Rs. 10 lakhs per year, which is exempt from service tax as per Notification No. 6/2005-ST and its amendments.
The bench reached the conclusion that as a group of persons is not an association of persons and as each and every individual’s receipt of rent is below the threshold limit of Rs. 10 lakhs, service tax cannot be demanded on the same.
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The bench, after going through various judgements, reached the conclusion that “there is no entity like an association of persons in the present case therefore the receipt of rent by individual cannot be clubbed together and demanded the service tax therefore the demand of service tax is not sustainable.
The Ahmedabad CESTAT, comprising Ramesh Nair (Judicial Member) and C.L. Mahar (Technical Member), allowed the appeal filed by the assessee.
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