2025-VIL-1688-CESTAT-CHD-ST
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SERVICE TAX CESTAT Cases

Service Tax - Renting of Immovable Property, Association of Persons (AOP) – Appellants entered into a tripartite agreement with State Bank of India and M/s Luminous Group to obtain a loan for construction of premises, which were later leased out to various entities - Revenue entertained an opinion that these four persons formed an "Association of Persons" (AOP) and were liable to pay service tax on the rental income - Whether the appellants should be treated as an AOP for the purpose of service tax liability on the rental income, or should the service tax liability be determined based on the individual rental income of each co-owner - HELD - The properties were co-owned by the individual owners in their individual capacities. Where the property is jointly owned, the service tax liability should be confined to the individual rental income of the co-owners, and they cannot be treated as an AOP – Further, the individual co-owners obtained central excise registration and started paying service tax from October 2011 whereas the show cause notice was issued on 17.10.2013. Under the circumstances, it is not understood as to how Revenue attempted to tax the AOP – The adjudicating authorities were not clear in their approach. On the one hand, they seek to recover service tax from a non-existent AOP and other hand, seek to appropriate the service tax paid by the individual owners. No case has been made by the Department to demand service tax from the alleged AOP - the impugned order is set aside and the appeal is allowed
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