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Renting of property by individual co-owners is a service provided in individual capacity and not as association of persons.
Facts
The respondents are co-owners of a property which was neither divided nor legally partitioned. A Joint agreement was executed with banks to let out the said premises and collect rent and charges for amenities. Though first appellate authority had decided the case in favour of revenue for a partial demand of service tax, penalties were set aside except penalties u/s. 77 (1) (a) and 77 (2) of the Finance Act, 1994. Department filed an appeal arguing that there was no documentary evidence to prove the partition of property and the agreement was a composite agreement for renting out entire property and commonly used for business. Further it was stated that the Small Scale Service Provider’s exemption was available ‘qua service’ and not ‘qua service provider’ and therefore, in the present case, the exemption was not available. Since there was intentional suppression of facts, penalties u/s. 76 and 78 of the Act were applicable. Relying on Shiv Sagar Estate 1993 (201) ITR 953 (Bom.), the Respondents contested that adjudicating authority grossly erred in holding him and his brothers as association of person.
Held
The Tribunal observed that since service providers were individuals, co-owners of the property were not liable to pay service tax jointly or severally. The property was jointly owned; lease agreements were entered in their individual capacity, the monthly rent was received by each co-owner equally and all the co-owners had obtained separate service tax registration. As was evident from records, they had paid appropriate service tax before initiation of investigation. Therefore, penalties u/s. 76 and 78 were not imposable.
