SSI Benefit Available to Joint Property Holders

Service tax on renting of Immovable properties has always been a contentious issue. Prior to introduction of Negative List the validity of service of renting of immovable property was challenged in various courts. With the specified entry in declared list the Government tried to put rest to all such issues, but as one issue has ceased, the other has cropped up. The property prices are very high in most parts of the country. Huge sums are required to buy and hold property. It is a common practice that properties are held in joint names. When properties are sold, the Income Tax department levies capital gain tax on each such co-owner separately. Even the rental incomes so generated are also shared on pro-rata basis and Income Tax department has never had any issues with the arrangement that the rental incomes of each individual is reflected and assessed separately.

However, the service tax department is of an opinion that all such receipts should be clubbed together as they are arising out of a single property having joint holders. The service tax department has been issuing demands for recovery of service tax, along with penalties and interest, to all such joint holders, whose total renal incomes crossed the threshold limit exemptions of 10 lakhs per annum. The Departmental adjudicating officers, at various levels, confirmed the service tax demands and also imposed penalties along with interest. The property owners had no remedy, but to approach the tribunals for justice and stay against such illegal orders.

Thankfully in the case of CCE, Nasik Vs. Deoram Vishrambhai Patel = STO 2015 CESTAT 72, the Mumbai Bench of the Honourable Tribunal has taken a view that co-owners of the property cannot be considered as liable for a service tax jointly. If individually rent is distributed to them and each co-owner is falling below the threshold exemption then such benefit of the basic limit of Rs.10 Lakhs should be forwarded to all assessee. The Tribunal held the view that since the all person are individually liable to pay service tax, they should be eligible for the general exemption Notification. Thus, the Tribunal rejected the Appeal filed by the Revenue Department and decided the issue in favour of assessee. This judicious order is expected to give a sigh of relief to many joint holders of property who has given their property on rent.

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