By TIOL News Service

MUMBAI, AUG 03, 2017: THE appellants entered into a contract with M/s. Fleetguard Filters Pvt. Ltd. for renting of commercial premises on rent amount of Rs.8 psf totaling Rs.2,02,240/- per month.

It was noticed that the appellants received gross amount of Rs.16,17,918/- for the period August 2007 to March 2008 and Rs.20,22,399/- for the period April 2008 to January 2009 against renting of immovable property service provided by them.

SCN was issued demanding service tax under the category of Renting of immovable property service.

The demand was confirmed and upheld by the lower appellate authority.

In appeal, the appellant submitted that the lease agreement was entered with M/s. Fleetguard Filters in the names of three persons who are having ownership of the property; that the amount of rent was equally paid by the lessee to these three persons namely Pandurang Hulawale, Sambhaji Hulawale and Jaymal Sambhaji Hulawale. Inasmuch as the entire rent amount cannot be clubbed and treated as income of one person i.e. the appellant. That if the rent received by individual person is taken, it will be much below the threshold limit of Rs.8 lakhs in the financial year and, therefore, no service tax can be demanded. Moreover, the lessee company had made payments to individuals after deducting the TDS as per the Income Tax Act and accordingly, the income of the other two persons cannot be clubbed in the rent received by the appellant.

The AR supported the impugned order.

The Bench observed -

"4. … even without going into the fact that who is the actual owners of the property, the fact remains that the rent agreement has been entered between the three persons, namely Pandurang Hulawale, Sambhaji Hulawale and Jaymala Sambhaji Hulawale. As per the payment terms, all the three persons were paid different amount of rent to individual after deduction of TDS. Therefore irrespective of ownership of the property, the important aspect is that who are the parties in the agreement and who have received the payment on account of renting of immovable property. As regards the appellant, he has received total rent of Rs.2,10,595/- in 2007-08 and Rs.6,74,130/- in the year 2008. Other amounts of agreement was received by other two persons Pandurang Hulawale and Jaymala Sambhaji Hulawale. The amount received by other two persons in their income and the same cannot be clubbed with the rent received by the appellants, it is very much below the threshold limit of Rs.8 lakhs up to which the service tax is exempted. Therefore, the demand is apparently not sustainable."

The appeal was allowed.

(See 2017-TIOL-2748-CESTAT-MUM)