Land component in membership charges excluded from service tax base subject to verification of actual transfer and records.

Membership charges linked to land were treated as comprising a service element and a separate land component for club or association service tax purposes. The land component was not includible in the taxable value if it was in fact transferred to the sister concern for allotment of plots, but that claim had to be verified against books of account, sale deeds and supporting records. To prevent over-inclusion or under-inclusion of tax, the matter was sent back for limited factual verification, including sample examination of sale deeds and account extracts.

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Issues: Whether the amount collected from members opting for membership with land was includible in the taxable value for levy of service tax under club or association service, and whether the matter required remand for verification of the actual transfer of land consideration.

Analysis: The amount charged for membership with land comprised two components, namely membership fee and land cost. The earlier order in the same assessee's case had already indicated that the land component need not be included in the service tax base if it was transferred to the sister concern for allotment of plots. At the same time, the actual flow of funds and the correspondence between the amounts collected and the sale deeds executed in favour of members had to be verified from the books of account and supporting documents. To avoid either over-inclusion or under-inclusion of the land component, the matter was directed to be examined by the original authority on a limited factual inquiry, with sample verification of sale deeds and account extracts.

Conclusion: The land component was not to be included in the taxable value if the claim of transfer to the sister concern was established, and the matter was remanded for limited verification of that factual claim.

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