M. Vijayabharathi Vs Commissioner of GST & Central Excise (CESTAT Chennai)
In a recent case, M. Vijayabharathi v. Commissioner of GST & Central Excise [Service Tax Appeal No. 42320 of 2014 dated June 14, 2023], the CESTAT (Customs, Excise and Service Tax Appellate Tribunal) in Chennai made a significant ruling. The tribunal overturned the order that imposed service tax on the entire rent received by co-owners collectively. Instead, it concluded that the income earned as rent by each co-owner fell below the threshold limit, making it exempt from service tax.
Facts:
Mr. M. Vijayabharathi (“the Appellant”) jointly with Smt. Akila entered into an agreement with tenants of Ananda Towers for providing services of renting of immovable property during the period of 2007-08 onwards.
Upon investigation the Commissioner of GST & Central Excise (“the Respondent”) found that the Appellant and Smt. Akila have not paid the service tax on the rental income received from the property. The Department issued a Show Cause Notice (“the SCN”) demanding service tax from both co-owners jointly. The Adjudicating Authority confirmed the demand along with the interest and penalty from both the co-owners.
Aggrieved by the order of the Adjudicating Authority the Appellant filed an appeal before the Commissioner of Central Excise (Appeals) who vide Order-in-Appeal No. TCP-CEX & CUS-000-APP-067-14 dated August 21, 2014 (“the Impugned Oder”) upheld the order of the Adjudicating Authority.
Aggrieved by the Impugned Order, the Appellant filed the appeal before CESTAT, Chennai.
The Appellant contended that the CESTAT, Chennai in the case of Smt. Akila vide final order No. 42538/2018 dated October 01, 2018 observed that the rental income received individually is within the threshold limit of levy of service tax thus, Smt. Akila is not required to pay service tax on the rental income.
Issue:
Whether the Co-owners of the property are liable to pay service tax on the rental income jointly?
Held:
The CESTAT, Chennai in Service Tax Appeal No. 42320 of 2014 held as under:
