Transfer of development rights treated as an interest in land, so no service tax liability arises on the transaction.

Transfer of development rights under a collaboration agreement was treated as a benefit arising from land and therefore as immovable property. On that basis, the transfer fell outside the definition of "service" under Section 65B(44) of the Finance Act, 1994 and within the exclusion for land and interests in land. The Tribunal held that no separate service tax liability could arise on the transaction, so the demand, interest and penalty could not survive and the impugned order was set aside.

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Issues: Whether transfer of development rights under the collaboration agreement constituted a taxable service liable to service tax.

Analysis: The Tribunal followed earlier decisions holding that transferable development rights are a benefit arising from land and therefore amount to immovable property. On that basis, such transfer falls outside the definition of service under Section 65B(44) of the Finance Act, 1994 and is covered by the exclusion for land and interests in land. The issue was stated to be squarely covered by precedent, and no separate service tax liability could arise on the transaction.

Conclusion: The transfer of development rights was not exigible to service tax and the demand, interest, and penalty could not survive.

Final Conclusion: The impugned order was set aside and the appeal was allowed.

Ratio Decidendi: Transfer of development rights, being an interest or benefit arising from land and thus immovable property, is excluded from the definition of service for service tax purposes.

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