Liability to pay services tax on development rights received by BMC

[vishwanath shetty]

Hello Experts, 

I would like to known the following, 

one of our client is involved in construction of residential and commercial buildings, 

they had taken up a project of  Slum Rehabilitation Authority (SRA ) were they had to build flats in a building  for the slum dwellers/tenants and to provide 35 extra flats. against this they had received Development rights.

Now department is saying to pay the service tax on the development rights received by them for providing 35 extra Flats, the amount of consideration is been calculated on the ready reckoner rate of the flats.

Are they liable to pay service tax on the development rights received by them? Please advise

AI Summary

No Service Tax on Development Rights in Slum Rehabilitation Projects Under Current Law A construction company involved in a Slum Rehabilitation Authority project received development rights in exchange for building additional flats for slum dwellers. The tax department demands service tax on the development rights, valuing them at the ready reckoner rate of the flats. The legal position is that there is no service tax liability on development rights, supported by a relevant court decision currently pending before the Supreme Court.