2026-VIL-1283-CESTAT-CHE-ST
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SERVICE TAX CESTAT Cases

Service Tax - Renting of Immovable Property Service - Status of Co-owners as Association of Persons - Appellants, who are co-owners of a commercial complex let out to various tenants from whom monthly rentals were being collected, were issued a Show Cause Notice proposing demand of service tax for the period from 2007 to 2012 on the basis that renting of immovable property fell under the definition of Renting of Immovable Property Service and treating them as an association of persons for assessment purposes - Whether co-owners of a property who individually collect rents and claim exemption within the threshold limit can be treated as an association of persons for Service Tax purposes and assessed jointly on the aggregate rental income received from the entire property – HELD - Co-owners cannot be regarded as an association of persons for joint assessment of their total rental income under Service Tax. Formation of an association of persons requires a meeting of the minds with shared objective and a conscious and consensual agreement among individuals. Mere co-ownership by operation of law through inheritance or under a common sale deed without any agreement to have a common or joint venture with joint management does not constitute an association of persons - The essential element required is volition and voluntary association with collective intent among the parties to manage the property for economic gain. Co-ownership arising from automatic or incidental circumstances does not satisfy this requirement. Separation of rental receipts paid directly to each co-owner and their distinct and identifiable ownership shares demonstrate absence of volition required for association formation. Each co-owner owns the property on his own strength and is entitled to individual assessment respecting their respective shares of rental income and may avail the applicable threshold exemption on an individual basis - The impugned orders are set aside and the appeals are allowed
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