Land purchase and resale for profit does not qualify as Real Estate Agent services for tax purposes

The CESTAT Ahmedabad held that a party engaged in purchasing and reselling land for profit cannot be classified as a Real Estate Agent for service tax purposes. The tribunal relied on precedent from Nilesh T Patel case, where similar land purchase and resale activities to real estate developers were held not to constitute Real Estate Agent services. The department's demand for service tax under the Real Estate Agent category was deemed unsustainable. The impugned order was set aside and the appeal was allowed in favor of the appellant.

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Issues Involved:

1. Whether the profit earned from the sale of land, initially intended for purchase, attracts the levy of Service Tax under the category of "Real Estate Agent."

Issue-wise Detailed Analysis:

1. Whether the profit earned from the sale of land, initially intended for purchase, attracts the levy of Service Tax under the category of "Real Estate Agent."

The appellants are engaged in the trading of land, involving the purchase and sale of land. Customarily, these transactions are preceded by an Agreement to Sale, where the appellant pays an advance to the seller and later purchases the land by executing a sale deed. Occasionally, the appellant becomes a confirming party in transactions where the property is eventually sold to a third buyer, receiving their advance back along with a markup. The entire sale price, including the advance and markup, suffers Stamp Duty and potentially Service Tax if the land is developed and sold as residential/commercial property.

The core issue is whether the profit earned from these transactions is liable to Service Tax under the "Real Estate Agent" category.

Arguments by the Appellant:

Shri. Saurabh Dixit, Advocate for the appellant, argued that this issue is no longer res integra, citing several judgments:
- Nilesh Patel 2023(5) TMI 97-CESTAT AHMEDABAD
- Premium Real Estate Developers 2018(11) TMI 1472-CESTAT NEW DELH
- Premium Real Estate Developers 2020(2) TMI 1071-Delhi HC
- Rattha Holding Co. P. Ltd. 2018(9) TMI 1722-CESTAT CHENNAI
- M.N. Dastur & Co. P. Ltd. 2023(6) TMI 1083-CESTAT KOLKATA

Arguments by the Respondent:

Shri. Himanshu P Shrimali, Superintendent (AR) for the revenue, reiterated the findings of the impugned order, asserting that the profit is liable to be taxed as Real Estate Agent Service.

Tribunal's Findings:

The Tribunal considered the submissions and perused the records, noting that the appellant's activity involves dealing in the purchase and sale of land, earning a profit. The department contends that this profit is taxable as Real Estate Agent Service. However, the Tribunal referred to several judgments, including:

- Nilesh Patel 2023(5) TMI 97-CESTAT AHMEDABAD: The Tribunal found that under a similar arrangement, the purchaser and reseller of land cannot be treated as a Real Estate Agent for charging Service Tax. The decision emphasized that there was no defined consideration for the alleged service, and the transaction was one of trading in land, not a service liable to Service Tax.

- Premium Real Estate Developers 2018(11) TMI 1472-CESTAT NEW DELH: The Tribunal held that in the absence of a defined consideration for the alleged service, there is no contract of service, and hence the transaction is not liable to Service Tax. The Memorandum of Understanding (MoU) between the parties indicated that the arrangement was more of a partnership rather than an agent-principal relationship, with no specific remuneration agreed upon.

Conclusion:

Following the decisions in the above cases, the Tribunal concluded that the appellant's activity does not fall under the category of Real Estate Agent Service. Therefore, the Service Tax demand under this head cannot be sustained. Accordingly, the impugned order was set aside, and the appeal was allowed with consequential relief in accordance with the law.

Pronouncement:

The judgment was pronounced in the open court on 30.08.2024.

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