Sponsored
    Follow Us:
Sponsored

Issue

Whether co-owners of a jointly held property are liable to pay tax as an association of individuals or as a body of individuals.

Applicant’s arguments

  • Each of the co-owners receives the rental proportionate to his share in the immovable property and the income tax authority assesses him separately on the income so received.
  • Merely because several persons jointly own an immovable property they cannot, therefore, be treated as ‘an association of persons or a body of individuals’.
  • These co-owners have not formed any association to provide taxable service.

Revenue’s view

  • Whether the shares are definite and specific or whether there is any scheme of management or not are all immaterial.
  • A common source of income should be the real test for ascertaining the existence of an association of persons.
  • Individual co-owners have come together to form association of person to rent out the property. The service provided is, therefore, indivisible. It can not be provided if one single co-owner recedes from the agreement for renting the property.  

Ruling

  • Revenue’s argument based on the indivisibility of the property fallacious.
  • Although the co-owners have jointly executed the contract and the service of renting the property cannot be supplied separately by any of the co-owners, it appears there is a judicial unanimity against treating the co-owners as an association of persons for taxation where their income from renting is separately ascertainable and assessed for income tax individually at the hand of each co-owner.
  • Conceptually, 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.
  • The Applicant and the other co-owners cannot be treated as an association of persons and, therefore, as a person defined under section 2(84)f of the GST Act, where their income from renting is separately ascertainable and assessed for income tax individually at the hand of each co-owner.

Source- In re Sri Rabi Sankar Tah (GST AAR West Bengal); Order No. 28/WBAAR/2019-20; 21/10/2019

Sponsored

Author Bio


My Published Posts

GST applicability on GTA – In simple terms Tax Audit Applicability – After Budget 2020 GST on Sale of Used Goods! DTAA : Fees for Technical Services Budget 2020 – Highlights of Direct Taxes View More Published Posts

Join Taxguru’s Network for Latest updates on Income Tax, GST, Company Law, Corporate Laws and other related subjects.

Leave a Comment

Your email address will not be published. Required fields are marked *

Sponsored
Sponsored
Ads Free tax News and Updates
Sponsored
Search Post by Date
December 2024
M T W T F S S
 1
2345678
9101112131415
16171819202122
23242526272829
3031