Case Law Details
Krishnakant Dipakbhai Patel Vs Commissioner of Service Tax (CESTAT Ahmedabad)
he case of Krishnakant Dipakbhai Patel vs. Commissioner of Service Tax before the CESTAT Ahmedabad involved a dispute over service tax liability on rental income from a jointly owned commercial property. The appellants, co-owners of the property, had leased it to M/s. Astron Research Limited through separate leave and license agreements. Each co-owner received their share of rent individually, with no one exceeding the ₹10 lakh threshold for service tax liability. However, the tax department contended that all co-owners should be treated as an Association of Persons (AOP), making them collectively liable for service tax under the category of renting immovable property. The revenue department argued that the total rental amount received by all co-owners should be clubbed together for tax assessment.
Upon reviewing the case, CESTAT Ahmedabad held that joint ownership alone does not automatically create an AOP unless there is a common business intent among the co-owners. The tribunal emphasized that each co-owner had an independent agreement with the tenant and received separate rental payments. As each individual’s earnings remained below the ₹10 lakh exemption threshold, service tax was not applicable under the relevant notifications. The tribunal cited several precedents, reaffirming that co-owners cannot be taxed collectively unless legally recognized as an AOP. Consequently, the tribunal ruled that the service tax demand was unsustainable and set aside the impugned order, allowing the appeal in favor of the appellants.
FULL TEXT OF THE CESTAT ALLAHABAD ORDER
The brief facts of the case are that the appellants are a co-owner of commercial property which was rendered out to M/s. Astron Research Limited for the office purpose, for which a leave and license agreement was entered into between the M/s. Astron Research Limited and every individual co-owner of the property. Every individual was separately paid rent of their share which comes to an amount which is less than Rs. 10 lakhs in every year. The case of the department is that for the purpose of charging service tax under the head of renting of immoveable property service. All the co- owners are considered as association of person as one entity and the total rent received by all the co-owners shall be taken as one and on the such total rent the service tax is payable under the head of renting of immoveable properties.
2. When the matter was called out none appeared on behalf of the appellants.
3. Shri Anand Kumar learned Superintendent (AR) appearing on behalf of the revenue reiterates the findings of the impugned He submits that since the property is owned by various persons jointly they are association of person which is one single entity accordingly total rent paid by M/s. Astron Research Limited shall be taken as payment made to association of person hence the service tax was rightly demanded.
4. On careful consideration of submissions made by both the sides and perusal of the records, we find that there is no dispute that even though the office property rented to M/s. Astron Research Limited is owned jointly by various persons that itself will not make the group of persons as association of person. As per the leave and license agreement it was entered separately with each co-owner of the property therefore every individual is recognized as one person and not association of persons. It is also fact that every individual was paid their share as the rent individually by the licensee M/s. Astron Research Limited. In this fact every individual is independent assessee and as per the undisputed fact every individual’s rent share is much below the threshold limit of 10 lakhs which is exempted in terms of Notification No. 6/2005-ST dated 01.03.2005 as amended by Notification No. 8/2008-ST dated 01.03.2008. As regard the contention of the adjudicating authority and Commissioner (Appeals) that from 01.07.2012. The definition of person also included AOP therefore from 01.07.2012 there is no ambiguity. In this regard, we find that firstly when in the facts of the present case all the co-owners do not constitute association of persons in the eyes of law therefore since as per the arrangement in the facts of the present case the individual person having independent leave and license agreement with the service recipient there is no formation of association of person. Therefore since the group of person is not an association of person in the present case, even with effect from 01.07.2012 also every individual’s receipt of rent is below the threshold limit of Rs. 10 lakhs the same is exempted. This issue has been considered in various judgments by this Tribunal in the following judgments.
- D. Chaudhary Vs. Commr. of Service Tax, Ahmedabad – 2013 (32) STR 441 (Tri.-Ahmedabad)
- Vamini Nitinkumar Shah Commr. of Service Tax, Ahmedabad – 2013 (31) STR 239 (Tri.-Ahmedabad)
- Manju Champaklal Bafna Commr of Service Tax, Ahmedabad – 2013 (31) STR 511
- Minaxiben J Thakker Commr. of Service Tax, Ahmedabad – 2013 (31) STR 329
- Pankajbhai Champaklal Parekh Commr. of Service Tax, Ahmedabad – 2013 (30) STR 325
- Chuniben Jaida Vs. Commr. of Service Tax, Ahmedabad – 2013 (30) STR 479
- Dinesh Patwa Vs. Commissioner of Service Tax – 2012 (25) Taxman 515 (Cestat)
- 2012 (TIOL) 1205 (Tri.-Ahmedabad)
In view of the above judgments and the facts of the present case, we are of the clear view that there is no entity like 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. Impugned order is set aside.
5. All the appeals are allowed.
(Order pronounced in the open Court on 10.12.2024)
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