Synopsis: The Hon’ble AAR, West Bengal in the matter of Sri Rabi Sankar Tah has held that where an immovable property jointly owned by three individuals is let out and the rental income received was separately ascertainable and same was assessed for income tax individually at hand of each co-owner, such co-owners could not be treated as an association of persons (AOP) as per Section 2(84)(f) of CGST Act/ WBGST Act.
Sri Rabi Sankar Tah (“the Applicant”) is one of the co-owners of immovable property, jointly owned by three individuals. All three co-owners, including the Applicant, hold an equal share in the property. The property is let out to CGST & CX, Chandannagar Division (“Central Authority”). Total rental received exceeds the threshold provided under Section 22(1) of the CGST Act, 2017 (“CGST Act”)/ West Bengal GST Act, 2017 (“WBGST Act”), but the share of each of the three co-owners does not cross the said threshold.
Whether the Applicant and the other two co-owners are to be treated as an association of persons or a body of individuals and, therefore, a person as defined under Section 2(84)(f) of the CGST Act/ WBGST Act, who is required to be registered under Section 22(1) of the CGST Act/ WBGST Act?
The Hon’ble AAR, West Bengal vide Order No. 28/WBAAR/2019-20 dated October 21, 2019 has held as under:
- The Applicant, along with the other co-owners, jointly owned an immovable property and rented it out to the Central Authority after executing a contract jointly to that effect. Each of the co-owners receives the rental proportionate to his share in the immovable property and the income tax authority assesses him separately on the income so received.
- Although the co-owners have jointly executed the contract and the service of renting the property cannot be supplied separately by any of the co-owners, there is a judicial unanimity against treating the co-owners as an association of persons for taxation where their income from renting is separately ascertainable and assessed for income tax individually at the hand of each co-owner.
- Therefore, the co-owners of a jointly held immovable property cannot be treated as an association of persons for determining the liability and requirement of registration under the CGST Act/ WBGST Act where their income from renting is separately ascertainable and assessed for income tax individually at the hand of each co-owner. ln so doing this Authority agreed with the views of the Kerala AAR in Elambrancheri Khaldoon [2018 (18) GSTL 152 (AAR – GST)]
Definition of AOP as under Section 3(31) of the Income Tax Act, 1961:
“Association of persons or a body of individuals or a local authority or an artificial juridical person shall be deemed to be a person, whether or not such person or body or authority or juridical person was formed or established or incorporated with the object of deriving income, profits or gains”