Co-owners of property are liable for service tax separately, not as an association of persons.

Per M. Ajit Kumar,

These appeals are filed by the appellants against the orders passed by the Ld. Commissioner (Appeals).

2. The issue in these appeals being common, though they were heard separately, a common order is being passed.

2.1 The appellants herein have rented out their properties / premises for commercial purposes to various lessees as per the lease agreements and have 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 (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 service tax liability jointly and should not have discharged the liability through individual registration by availing turnover based threshold exemption.

2.3 Per contra the appellant was of the view that the Undivided Share (UDS) in the land had been clearly identified and demarcated. The co- owners have not joined their resources to acquire the property nor is the land or building in the name of the association and it is not being commonly managed. They are referred to in the Lease Deed as in plural as ‘Lessors’ as they had entered into the deed in their individual capacity. Security deposit was also to be given to individuals separately. They are hence eligible for the turnover based exemption from Service Tax on an individual basis. The facts of individual appeals are detailed below.

3. Appeal No. ST/41598/2015 & ST/40130/2017

3.1 The period of dispute is from 01.04.2008 to 31.03.2013 (SCN Dated 23.10.2013) and 01.04.2013 to 31.03.2014 (SCN dated 26.03.2015) respectively. The department alleges that Shri Naresh Gopaldas Lund and eight others leased 'Srivari Gokul Towers' for commercial purposes, vide common lease deed dated 19.09.2006 (to Suzlon Energy Ltd) and License Agreement dated 01.09.2010 (to HSBC) in which all the co-owners were identified as Lessors. The property was jointly owned by the co-owners and there was no specific demarcation of the said property among the co-owners. Each of the individual Co-owners received his share of the rent, which is proportionate to his share in the property, through separate Account Payee cheques.

3.2 Upon review of documents, authorities found they had not discharged service tax liabilities under the relevant provisions of the Finance Act, 1994 and Service Tax Rules, 1994. It is alleged that despite earning taxable rental income, the appellants failed to comply with Sections 65 , 69, and 70 of the Act, resulting in Show Cause Notices issued in 2013 and 2015. Following due process, the adjudicating authority confirmed the service tax demand with interest and im