2014 (12) TMI 958 - AT - Service Tax

CESTAT Upholds Service Tax on Land Transaction: Clarifies Real Estate Agency Services vs. Land Sale

The Appellate Tribunal CESTAT Bangalore upheld the demand for service tax on an applicant's transaction involving land purchase and subsequent sale. The ... Waiver of pre-deposit of service tax - Real estate agents service - Held that:- The applicants agreed to purchase land for certain consideration from land owner. Subsequently entered into another agreement for sale of the same land, without getting it registered in their own name and without giving full consideration to the land owner, with the builder. There is no registered sale deed transferring land in the name of the present applicant. As per the definition of ‘real estate agent’ as provided under Finance Act, real estate agent means a person who is engaged rendering any service in relation to leasing or renting of real estate agent. In the present case, the activity undertaken by the applicant is real estate agency as the applicant had not transferred the land in his name before entering into an agreement for sale with the builder. Therefore, we find no merit in the contention of the applicant that it is a case of sale and purchase of land. Under these circumstances as we find that applicant failed to make out a case for total waiver of service tax. - Partial stay granted. Issues:1. Whether the activity undertaken by the applicant falls under the definition of 'Real Estate Agents service' for the purpose of service tax liability.2. Whether the applicant is liable to pay service tax on the transaction involving the purchase and subsequent sale of land.Analysis:1. The applicant contended that the demand for service tax was not sustainable as they purchased the land and subsequently sold it, which, according to them, did not fall under the category of Real Estate Agents service. They argued that they entered into agreements with landowners for purchase and later with a buyer at a higher consideration, transferring the land without being registered as owners. However, the Revenue argued that the applicant's activities did constitute Real Estate Agency service as per the definition provided under the Finance Act. The Tribunal examined the agreements and found that the applicant's actions aligned more with the role of a real estate agent, facilitating the sale between the original landowners and the ultimate buyer, without transferring the land in their name. Consequently, the demand for service tax was upheld, and the applicant was directed to make a partial deposit.2. The Tribunal further analyzed the transaction in question, emphasizing that the applicant did not transfer the land in their name before entering into the agreement with the buyer. This led to the conclusion that the applicant's actions were more in line with real estate agency services rather than a straightforward sale and purchase of land. As a result, the Tribunal found no merit in the applicant's argument for a total waiver of service tax. Considering the circumstances, the Tribunal directed the applicant to deposit a specific amount within a stipulated period, with the remaining service tax liability and interest being waived upon compliance. The decision was based on the interpretation of the relevant legal provisions and the specific facts of the case.In conclusion, the judgment by the Appellate Tribunal CESTAT Bangalore addressed the issues raised regarding the applicability of service tax on the applicant's transaction involving land purchase and subsequent sale. The decision hinged on whether the activities of the applicant fell within the scope of Real Estate Agents service as defined by the Finance Act. The Tribunal's detailed analysis of the agreements and the sequence of events led to the determination that the applicant's actions aligned more with real estate agency services, warranting partial payment of service tax. The judgment underscored the importance of legal definitions and factual circumstances in determining tax liabilities in such cases.