Page 153 - GSTL_11th June 2020_Vol 37_Part 2

2020 ] RUCHI INFRASTRUCTURE LTD. v. COMMR. OF C. EX., CUS. & S.T., INDORE 239
cided in their favour. He explains the nature of the agreement between them and
M/s. MPWCL as discussed above. He argued that at no point of time was there
any doubt or even an allegation in the show cause notice that the arrangement
was a joint venture between them and MPWCL. As a part of the joint venture
they had undertaken some activities such as giving out their warehouses for
storage of the customers’ goods, insuring the goods so stored, while MPWLC
undertook the remaining activities. The income which has received from the cus-
tomers was shared in the ratio of 65% to the Appellant and 35% to MPWLC. The
agreement itself shows that there was no service provider-service recipient rela-
tionship between them but there was a relationship of equal partners on princi-
pal to principal basis in a joint venture and income sharing. The Finance Act,
1994 does not provide for taxing the income of one partner in a joint venture
deeming it to be rendition of service to the other. On this ground alone, this ap-
peal may be allowed.
8. He further argues that renting of immovable property is taxable un-
der Section 65(105)(zzzz) only when such renting is for use in the course of or
furtherance of business or commerce. MPWLC is not an organisation engaged
business or commerce but is only an organisation of the Government mandated
to provide warehousing facilities for agriculture produce.
9. On the question of the Income Tax being deducted as TDS under Sec-
tion 194(1) of the Income-tax Act by MPWLC before remitting their share of in-
come to them, he would submit that this was definitely a mistake. However, a
mistake by one partner does not make another partner liable to service tax, when
the nature of activity itself is not covered by charging section of the Finance Act,
1994.
10. For the aforesaid reasons and the fact that the matter has already
been dealt with and decided in their favour for the earlier periods, he prays that
entire demand may be set aside along with interest and penalties.
11. Per contra, Learned Departmental Representative reiterates the find-
ings of the original authority. He points out that in the previous order passed by
this Bench, the issue that Income Tax was deducted as TDS from the payments
made to the appellant by MPWLC under the Income-tax Act has not been ad-
dressed at all. He would point out that this was a very crucial element in the de-
cision of the adjudicating authority that the nature of transaction is that of rent-
ing of immovable property despite the agreement being worded otherwise.
Hence, the appeal may be rejected.
12. We have considered the arguments on both the sides and perused
the records.
13. Section 65(105)(zzzz)of the Finance Act, 1994 provides for charging
service tax on “any service provided or to be provided to any person, by any
other person by renting of immovable property or any other service in relation to
such renting for use in the course of or for furtherance of business or commerce”.
For a tax to be levied under this heading, there must be a service provider and a
service recipient and the service which is provided must be renting of immova-
ble property and such renting must be for use in the course of furtherance of
business or commerce. A plain reading of the arrangement between the appellant
and MPWLC as narrated in the show cause notice as well as in the impugned
order clearly shows that it was a joint venture with an income sharing arrange-
ment. In such a relationship, there is neither a service provider nor a service re-

GST LAW TIMES  11th June 2020  153