CESTAT: Rent of all co-owners of property, could not be clubbed so as to deny benefit of SSI Exemption

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  • Assessees were joint owners of a property. They gave said property on rent to ICICI Bank Ltd. on monthly rent basis. Tenant bank was making payment of rent individually to all four owners of above property by issuing separate cheques/demand drafts in their individual names.
  • Adjudicating Authority was of view that registration of property in four individual names and execution of rent/lease agreement with ICICI Bank in separate names was only to evade payment of service tax by availing threshold limit of Rs. 10 lakhs under SSI Exemption Notification No. 8/2008, dated 1-3-2008.
  • Commissioner (Appeals) also held that since all above applicants provided service of renting of immovable property collectively to a single service receiver i.e. ICICI Bank, liability to service tax should be discharged collectively on amount of rent received by them even though they had received rent amount separately in their accounts.

Whether for considering SSI benefit under Notification No. 8/2008, dated 1-3-2008, receipt of service provider needs to be considered individually and only after they have crossed threshold limit of Rs. 10 lakhs, service tax would be leviable – Held, yes

Whether, therefore, clubbing of value of service, i.e., rent of all four individual co-owners of property was legally not sustainable – Held, yes

Citation: [2018] 95 taxmann.com 184 (Delhi)