Whether a Church that is not a separate legal entity be liable for service tax under ‘Renting of Immovable Property Services'?

PJ/Case law/2013-14/1876

Case:- UNIT OF THE CHURCH OF SOUTH INDIA TRUST ASSOCIATION Vs. UNION OF INDIA

Citation:- 2013-TIOL-648-HC-KAR-ST

Brief facts:- Since The appellant is Church of South India’s Central Diocese registered under Section 248(5) of Indian Companies Act, 1913 and providing service under the category of sale of space or time for advertisement and renting of immovable property service. The revenue passed order and demanded service tax along with interest and penalty. The appellant filed appeal before High Court against the order of revenue. Common questions of fact and that of law arise for decision making in these petitions, with the consent of the petitions are clubbed together.

Appellant’s Contention:-The appellant submit that the 'certificate of incorporation' of the Church of South India Trust Association issued under Section 248(5) of Indian Companies Act, 1913 and dated 31.8.1948, as also the memorandum of association of the Church of South India Trust Association, to submit that the Karnataka Central Diocese is a Unit and is not a separate legal entity. The appellant hastens to add that the petitioner-CSTIA, Karnataka Central Diocese is not an assessee nor a person for the purpose of service tax.

Respondent’s Contention:- The respondent-revenue does not oppose the submission that petitioner is not a legal entity but serves as a Unit of the CSITA and that if at all any proceeding is to be initiated, it is against CSITA.

Reasoning Of Judgment:- After having heard the learned Counsel for the parties, for quite some time the petitioner points to the 'certificate of incorporation' of the Church of South India Trust Association issued under Section 248(5) of Indian Companies Act, 1913 and dated 31.8.1948, as also the memorandum of association of the Church of South India Trust Association, to submit that the Karnataka Central Diocese is a Unit and is not a separate legal entity. Learned counsel hastens to add that the petitioner-CSTIA, Karnataka Central Diocese is not an assessee nor a person for the purpose of service tax, the commissioner of service tax on a wrong premise, that the petitioner was, (i) a Trust Association registered under the Companies Act, 1913 owning immovable property in Bangalore city; (ii) were renting out the space in their properties for erection of hoardings and letting out, office/commercial premises after obtaining service, tax registration dated 8.5.2009 under the category of 'Sale of Space or Time for Advertisement and Renting of Immovable Property Services' having made reference to Section 65(90a) and Section 65 (105)(zzzm)/(zzzz) of the Finance Act, 1994 without noticing that the agreements of lease is entered into between Church of South India Trust Association, represented by the Secretary of the petitioner unit, without recording reasons, findings and conclusions over the claim of exemption under Section 65(90a) of the Finance Act, passed the order dated 29.3.2012 Annexure-A clamping liability to pay service tax, interest and penalties. The adjudicating authority also added that the petition is accordingly allowed in part. The order Annexure-A is quashed. The vires of Section 65(90)(a) and Section 65(105)(zzzz) of the Finance Act, 1994 though questioned in this petition does not survive for consideration and is kept open for consideration in an appropriate proceeding. If the Finance Act, 1994 in respect of the service tax applies to Church of South India Trust Association which is the organization which owns and holds immovable property, it is open for the respondent-revenue to apply its mind before taking any action for the purpose of issue of proposition notice.

Decision:- Petition Allowed.

Comment:- The crux of this case is that when the assessee is not a separate legal entity by itself, the demand of service tax is not legally tenable on it.

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PJ/Case law/2013-14/1876

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