Jointly owned property,small service exemption available to co-owners

If a property, jointly owned by two or more persons, is rented out by such persons separately to a single person, all such co-owners would be eligible for small service provider's exemption of Rs. 10 lakh separately

 CESTAT, AHMEDABAD BENCH

Dilip Parikh

v.

Commissioner of Service-tax, Ahmedabad*

M.V. RAVINDRAN, JUDICIAL MEMBER
AND B.S.V. MURTHY, TECHNICAL MEMBER

Misc. Order No. 10446/2013-WZB/AHD
Application No. ST/Stay/1517 of 2012
Appeal No. ST/594 of 2012

JANUARY  10, 2013 

Section 93, read with section 65(90a), of the Finance Act, 1994 - Exemptions - Service Tax - Small service providers/Threshold exemption - Assessees, being co-owners of a building, rented out such building to a tenant and rent was received by all such co-owners separately through different cheques - Since rent received separately by each co-owner did not exceed Rs. 10 lakhs, they claimed threshold exemption under Notification No. 6/2005-ST, as amended - Department argued that amount was to be assessed collectively and sought to club all receipts alleging that separation was made with a view to gain tax benefit - HELD : Rental agreement between parties clearly provided that all co-owners were individually renting out such building to a single person - Cheques were also received separately by them - Small service providers/Threshold exemption speaks of aggregate value of taxable services and if, individually, all co-owners are considered as separate service providers, their aggregate value did not exceed exemption limit - Hence, prima facie, case was in favour of assessee and pre-deposit was waived accordingly [Paras 6 and 7] [In favour of assessee]

Circulars and Notifications : Notification No. 6/2005-ST, dated 1-3-2005 and Notification No. 33/2012-S.T., dated 20-6-2012

EDITOR'S NOTE

If, by virtue of a single rental agreement, a single building is rented to a single tenant, there may be a presumption that such group of two or more persons constitutes an Association of Persons/Body of Individuals, which amounts to a separate person in the eyes of the service tax law. If that be so, clubbing has to follow.

In this case, the department had sought to club the receipts but without any argument to the effect of either tax-avoidance or existence of an AOP/BOI.

Though this judgment is a prima facie view, however, clubbing of clearances is not new for central excise purposes and there are judgments of the Supreme Court as well on the subject.

The law needs clarification from all angles for service tax purposes, given that SSI-exemption notification under service tax does not provide for premises wise clubbing, which is there in central excise counterpart.

Ms. Shilpa P. Dave  for the Appellant. Manoj Kutty  for the Respondent.

ORDER

M.V. Ravindran, Judicial Member - These applications are filed for waiver of pre-deposit of amount of service tax liability of Rs. 1,98,828, interest thereof and penalties under sections 77 & 78 of Finance Act, 1994.

2. Heard both sides and perused the record.

3. The issue involved in this case is regarding service tax liability on the above mentioned individuals as a provider of service under the category of renting out of immovable property.

4. Ld. Counsel appearing on behalf of the appellants would submit that all the above individuals are co-owner of a particular building and have rented out the premises to a person, who issues different cheques to all the above individuals as they are co-owners. It is his submission that the amount received by the individuals would be within the threshold limit of SSI exemption as granted by Notification No. 6/2005-S.T., dated 1-3-2005 and amended vide Notification No. 08/2008-S.T., dated 1-3-2008. It is his submission that the Revenue has considered the amounts received by all of the applicants as collectively and seeking to charge the service tax liability individually on the persons.

5. Ld. DR, on the other hand, would submit that the property involved in this case is jointly owned by all the persons and the said property is being rented out and hence there is service of renting out of an immovable property. It is his submission that for individual purposes, and for the purpose of benefit of individual co-owners, the appellants sought the payment individually. It is his submission that the department is correct in assessing the service tax liability after considering the amount collectively received by the individual appellant.

6. After considering the submissions made by both sides, we find that benefit of SSI' exemption Notification No. 6/2005-S.T., dated 1-3-2005 as amended vide Notification No. 8/2008-S.T., dated 1-3-2008, grants the benefit of exemption of service tax per year, provided that the assessee has not crossed the threshold limit of rupees ten lakhs in the preceding financial year. In these cases, if the cheques for rent are received individually by all the appellants, it was indicated in the agreement between the individuals for the purpose of renting out of premises to another person so as to make it specific that individually they are renting out the property to a person. On perusal of the said notification, we find that the said notification talks about the aggregate value of the taxable services rendered, should be considered for the purpose of exemption and in this case if individually all the appellants be considered as provider of such service, their aggregate value does not exceed the threshold limit. Prima jack, we find that the appellants have made out a case for waiver of pre-deposit of amounts involved.

7. Accordingly, the applications for waiver of pre-deposit of amounts are allowed and recoveries thereof stayed till disposal of appeals.

Refer:[2014] 41 taxmann.com 311 (Ahmedabad - CESTAT)