Service tax on flat construction and undivided share of land turns on the residential complex definition and taxable period

Construction of residential flats by a builder or promoter was discussed in the context of service tax on construction of residential complex service. The text notes that the statutory definition of "residential complex" excludes a complex constructed by a person directly engaging another person when the construction is intended for personal residential use, and that this exclusion did not apply where the appellant built 106 residential units for sale. On the stated facts, the agreements and sale deeds showed sale of only undivided share of land, with construction linked to sale of flats, and the cited reasoning indicated that later expansion of the taxable entry could not fasten liability for the relevant period. The stated conclusion is that no service tax was payable on the sale of undivided share of land.

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Issues: Whether a builder or promoter who sold only undivided share of land while constructing flats under separate agreements was liable to service tax under the category of construction of residential complex service.

Analysis: The definition of "residential complex" in Section 65(91a) of the Finance Act, 1994 excludes a complex constructed by a person directly engaging another person where the construction is intended for personal use as residence. On the facts, the appellant constructed 106 residential units and the complex was not for its own personal residential use. The agreements and sale deeds showed that the appellant sold only undivided share of land, while the construction activity was undertaken in the context of sale of flats. The reasoning adopted in the cited decisions supported the view that the later expansion of the taxable entry could not be used to fasten liability for the relevant period.

Conclusion: The appellant was not liable to service tax on the sale of undivided share of land in the facts of the case.

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