AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2019 (5) TMI 1490
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.... for the consideration received for transferring land development rights. On the basis of that information, search was conducted on 21.07.2014 wherein documents were resumed and statement of Shri Mr. Kailash Chandra, Authorized Signatory and AGM of the appellant company was recorded wherein it is stated that neither executed any sale deed nor did they pay any stamp duty of their activity for transferring of land development rights. On scrutiny of documents one business development agreement dated 02.08.2006 it was executed between the appellant and M/s DLF Commercial Projects Corporation (DCPC) wherein the appellant has acquired the land development rights from DCPC. 3. The main features of the said agreements are as under:- 5.1 The salient features of the said agreement dated 02.08.2006 are as under: a) DCPC have definitive arrangements with various landowners and are in the final stages of negotiations for acquisition of development rights in certain land situated in the State of Haryana in District Gurgaon, which is capable of being developed for the development and construction of commercial, residential, retail, industrial park, information technology parks, special ec....
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....ich was adjudicated and demand of service tax was confirmed against the appellant. Against the said order, the appellant is before us. Therefore, the present appeal. 4. The Ld. Counsel for the appellant submits as under:- i) That the Appellant is engaged, inter-alia, in the business of purchasing land and developing the real estate in the State of Haryana. ii) That the Appellant had given an advance of Rs. 1424.83 Crores to DLF Commercial Projects Corporation (hereinafter called DCPC) and DCPC, in turn, gave the very same amount as refundable performance deposit to various Land owning companies. In fact, DCPC was to acquire either the land or Development Rights (hereinafter called DR) from various land owning companies to whom the DCPC had, in turn, passed the above said amount of Rs. 1424.83 Crores as refundable performance deposit. The DCPC was to obtain / arrange license from the Govt. of Haryana towards a step for development of land which were acquired or to be acquired by various land owning companies. iii) That a Show Cause Notice dated 15.03.2016 covering the period 1.7.2012 to 31.3.2015 was issued alleging that the Appellant had either exploited (DR) or subsequen....
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....ection 65B (44) is as under:- "(44) 'service' means any activity carried out by a person for another for consideration, and includes a declared service, but shall not include (a) an activity which constitutes merely, - (i) a transfer of title in goods or immovable property, by way of sale, gift or in any other manner; or vii) Section 65B (44) (a) (i) says that transfer of title in goods or immovable property, by way of sale, gift or in any other manner. In other words, the transaction of transfer of title either in goods or in "immovable property" are excluded from the purview of "Service". A question then arises, what is the meaning of the word "immovable property". Immovable property has not been defined in Finance Act, 1994 but has been defined in Section 3(26) of General Clauses Act, 1987 in following words:- viii) Section 3 (26) of the General Clauses Act, 1987 reads as under:- (26) "immovable property" shall include land, benefits to arise out of land, and things attached to the earth, or permanently fastened to anything attached to the earth; ix) The aforesaid definition clearly says that the immovable property includes not only "land" but also the benefi....
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.....2014 to the Joint Secretary, Ministry of Finance, Government of India, New Delhi and one of the member of Big Fours CA Firms sent various communications to the Government seeking clarification/confirmation about the levy of "Service Tax" on "Development Right" and the Government never, in the past, viewed that the Service Tax is payable. xiii) Hence, extended period cannot be invoked. The demand for the period 31.3.2013 to 02.09.2014 is time barred since SCN has been issued 15.3.2016. 5. On the other hand, the Ld. AR for the Revenue submits as under:- Whether transfer of Land Development Rights against a consideration is a service under 65B (44) of Finance Act 1994. It is submitted that the transactions involving immovable property can fall only under 3 categories which are as follows:- (a) Transfer of title of immovable property viz sale. (b) Activities carried out for the development of the immovable property after grant of development rights. (c) Enjoyment of immovable property by way of leasing, renting, easement etc. '(b) and (c)' above are in the nature of Service only and cannot be termed as sale by any stretch of imagination. 'Transfer of Title' either....
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....nce of any agreement of sale under Section 53A of the Transfer of Property Act." In the instant case also the impugned agreement consists of the aforesaid mandatory clause. (v) Definition of service under Section 65B (44) of Finance Act 1994. The taxable service under finance Act 1994 is defined as follows: "(44) 'service' means any activity carried out by a person for another for consideration, and includes a declared service, but shall not include (a) An activity which constitutes merely - - A transfer of the title in goods or immovable property, by way of sale, gift or in any other manner, or - Such transfer, delivery or supply of any goods which is deemed to be a sale within the meaning of clause (29A) of Article 366 of the Constitution, or - A transaction in money or actionable claim," It may be seen from above, that only the activity which "merely" constitutes a transfer of the title in immovable property is excluded from taxation. It is pertinent to highlight that there are many benefits which can arise from immovable property / land but only the benefits where the transfer of title is involved i.e. sale is excluded from taxability. All the remaining....
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....ce DCPC acquired land development rights without the title of land, therefore, DCPC further transferred development rights to DLF without the title of the land. In the present case, DLF further sold development rights, obviously without the title of land and demand has been raised by the department on consideration received by DLF on transferring/ selling/relinquishing of the land development rights without the transfer of land title. (c) M/s DLF Ltd. (DLF) provided business advance or an ad-hoc fund to DCPC for procuring development rights from other companies. The advance was other than loan or working capitals, provided by DLF to DCPC. The accounts of DCPC show that many times a part of such business advance or ad-hoc fund had been returned to DLF, if such fund was not used by DCPC for procuring development rights from other companies. In the show cause notice issued to DCPC, service tax have been demanded only on that amount which was used by DCPC (out of total business advance or ad-hoc fund) for procuring development rights from other companies. (d) The Accounts of DLF and DCPC shows that receipt of development rights in their annual audited accounts under the head of "....
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.... with its transfer of land development rights then appropriate stamp duty would have been paid to the State. Neither DCPC nor DLF paid such stamp duty on impugned transfer of development rights. The agreements discussed in paras 5 to 6.5 of SCN show that acquiring or transferring the development rights to develop and carry out construction, does not involve transfer of title in land. The Business Development Agreement dated 02.08.2006, discussed in paras 5 and 5.1 of the SCN, under which DLF had acquired the land development rights from DCPC, did not transfer the title of land in favour of DLF. Para 2.2 of the Development Agreement dated 05.12.2006 under which DLF had acquired the land development rights, specifically mentions as under: "The parties agree that nothing contained herein shall be construed as delivery of possession in part performance of any agreement of sale, under Section 53A of the Transfer of Property Act, and/ or such other applicable law for the time being in force. It is clarified that M/s Red Topaz Real Estate Private Ltd., (RREPL) shall be the owner of the Scheduled Property and the Developer shall have the permission to enter upon the Scheduled Property o....
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.... M/s DLF Commercial Projects Corporations and further transferred those rights to various parties, therefore, the appellant is liable to pay service tax. 8. We have gone through the facts of the case in the case of M/s DLF Commercial Projects Corporations vs. Commissioner of Service Tax, Gurugram (DCPC) vide Final Order No. 60554/2019 dated 22/05/2019 wherein it has been held that they have not transferred any development right to the appellant in question, therefore, no service tax is payable by observing as under:- "6. On hearing the parties, the sole issue emerges before us is whether the appellant has transferred any land development right in favour of M/s DLF Ltd. or not? To decide the issue, we have to go to the facts of the case, we find that as per the business module of M/s DLF Ltd. they are engaged in the business of Real Estate Development of integrated township and construction. As per their business module, the appointed the appellant to purchase the land on their behalf and thereafter to obtain certain formalities from various Govt. Department and to handover the land to the appellant as per agreement dated 02.08.2006 for further development and thereafter to t....
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....s a fact on record that the appellant is not the owner of the land, therefore, how can he transfer development rights to M/s DLF Ltd. and as per the records, the amount given by M/s DLF Ltd. has been transferred by the appellant to various LOCs for purchase of the land. Therefore, it is mere transaction of the sale and purchase of land or purchase of land by the appellant for DLF Ltd. for further development. As appellant did not get any ownership of the land, in that circumstances, transfer of development right does not arises. There is no such agreement placed on record that any LOCs (who are the owner of the land) has transferred any development rights to the appellant. If so, how much the consideration paid by the appellant and in that circumstances, the land owning company (LOCs) are liable to pay service tax. Admittedly, LOCs were never issued show cause notice and nor made the party to the show cause notice in question. In such a situation, the question of transfer of development right by the appellant does not arise. These findings are on the factual aspect of the case. 10. We further find that in this case, when the land-owning company transfers land development rights t....
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....and was taken over by the appellant. Consequently, the appellant have no right to transfer land development to M/s DLF Ltd. 12. From the above, it is clear that the appellant has not transferred any land development right to M/s DLF Ltd. or its subsidiary nominees etc. 13. We also take a note of the fact that similar facts enumerate from the case of Premium Real Estate Developers vs. CST-Service Tax, Delhi in Appeal No. ST/50103-50104/2014 wherein the facts of the case are as under:- 2. The appellant 'Premium Real Estate Developers', New Delhi is a partnership firm and is in the business of real estate trade. The main objective of the partnership firm is to carry on the business of purchase, sale, develop, take and exchange or otherwise, whether for investment or sale in any real estate including lands to carry on the business of builders, contractors, dealers in land, building and any other activity in connection therewith and incidental thereto. 3. Sahara India Commercial Corporation Ltd. ('Sahara India' for short) was interested in acquiring large parcels of land for setting up townships. Accordingly Sahara India entered into three separate but similar memorandum of ....
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....efault on the part of the appellant, the same could be made good by way of forfeiture of such amount, so withheld. 5. Pursuant to the MOU, the appellant firm received advance amount from Sahara India for each site. Substantial part of such amount was used by the appellant to pay to the seller or the prospective seller of the land, for agreeing to sell land to Sahara India. The details of such amount based on the payment made by Sahara India, are as follows; Place/Site Amount paid under land purchase head to appellant Area of land transferred in the name of Sahara (in acres) Amount as per sale deeds in Rs. Amount under development head Kanpur 8,98,00,000/- 38.85 2,66,99,800/- NIL Lalitpur 5,50,00,000/- 77.96 4,22,01,779/- NIL Raebarelli 6,75,00,000/- 89.91 1,69,20,822/- NIL 6. For the purpose of reference we refer to Memorandum of Understanding (MOU) dated 15th November 1983, related to Lalitpur town, entered between Sahara India and the appellant, wherein Sahara India was interested to purchase 100 acres of land for developing residential township in and around the city of Lalitpur. The appellant assured to make available 100 acres of la....
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.... best to get the settlement arrived among the co sharers/co owners and agreement to sell shall be executed accordingly. 6.7 That it is the responsibility of the appellant for bringing the cultivators/land owners to the Registrar office along with the necessary documents and photograph and to witness execution/registration of the documents. 6.8 That all payments to the Kashtkar/land owners, shall be made through pay orders/demand drafts/account payee cheques. That the difference, if any, of the amount being actually paid to the cultivators /owner of land and the average rate, shall be payable to the appellant. Such payment of difference to the appellant shall be regulated in such a manner so as to ensure the performance of the terms and conditions of the MOU. The first party Sahara India may under discretion withhold maximum up to 10 per cent of the amount payable to the second party/appellant to ensure peaceful/proper demarcation and possession, mutation and construction of the boundary wall of the entire land. In case, the appellant fails to fulfil its obligations as stipulated in the terms of the contract/MOU, the same can be terminated by Sahara India and the withheld amou....
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....7 (48) S.T.R. 69 (Tri. - Mumbai). The relevant extract is reproduced here below :- "18. In our view, in order to render a transaction liable for service tax, the nexus between the consideration agreed and the service activity to be undertaken should be direct and clear. Unless it can be established that a specific amount has been agreed upon as a quid pro quo for undertaking any particular activity by a partner, it cannot be assumed that there was a consideration agreed upon for any specific activity so as to constitute a service. In Cricket Club of India v. Commissioner of Service Tax, reported in 2015 (40) S.T.R. 973 it was held that mere money flow from one person to another cannot be considered as a consideration for a service. The relevant observations of the Tribunal in this regard are extracted below : "11. ...Consideration is, undoubtedly, an essential ingredient of all economic transactions and it is certainly consideration that forms the basis for computation of service tax. However, existence of consideration cannot be presumed in every money flow. ... The factual matrix of the existence of a monetary flow combined with convergence of two entities for such flow can....
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....ount of Rs. 3,66,32,000/- have been spent by the appellant for procurement and registration of land. Thus, an amount of Rs. 4,75,18,000/- still remain unspent with the appellant. It is to be seen that out of the above amount though the MoU was for 100 acres of land till the issue of the show cause notice only 77.96 acres of land could only be acquired and thus the remaining amount still was to be used for procurement/acquisition of balance land. This indicates that firstly; the MoU has not been executed fully and therefore the actual remuneration to the appellant have not got finalized and therefore we feel that issuing the show cause notice in such a stage was premature and unwarranted. 31. As discussed above, since the exact amount of remuneration for providing any service, if any, has not been quantified at the same time since most of the MoU remained to be fully executed and therefore the exact amount of remuneration, which was the difference in amount paid to the seller of land and average price decided in MoU, could not be finalized and therefore we feel that taxable value has not reached finality and therefore demanding service tax on the entire amount paid to the appella....
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.... the document in question purported to convey that which falls within the definition of immovable property. The so-called lease being an unregistered instrument, it could not effect the transfer and could not be admissible in evidence. We are therefore of opinion that the Court of first instance was right. We set aside the order of the lower appellate Court and restore the decree of the Court of first instance with costs in all courts." Further, in the case of Chheda Housing Development Corporation vs. Bibijan Shaikh Farid, the Hon'ble High of Bombay observed as under:- 15. The question is whether on account of the term in the clause which permits acquisition of slum TDR the appellants in so far as the additional FSI is concerned, are not entitled for an injunction to that extent. An immovable property under the General Clauses Act, 1897 under Section 3(26) has been defined as under:- (26) "immovable property' shall include land, benefits to arise out of land, and things attached to the earth, or permanently fastened to anything attached to the earth." If, therefore, any benefit arises out of the land, then it is immovable peruperty. Considering Section 10 of the Specific Re....
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....mmovable property under the General Clauses Act, 1897 under section 3(26) has been defined as under : - (26). "immovable property" shall include land, benefits to arise out of land, and things attached to the earth, or permanently fastened to anything attached to the earth." If, therefore, any benefit arises out of the land, then it is immovable property. Considering section 10 of the Specific Relief Act, such a benefit can be specifically enforced unless the respondents establish that compensation in money would be an adequate relief. Can FSI/TDR be said to be a benefit arising from the land. Before answering that issue we may refer to some judgments for that purpose. In Sikandar and ors. .vs. Bahadur and ors., XXVII Indian Law Reporter, 462, a Division Bench of the Allahabad High Court held that right to collect market dues upon a given piece of land is a benefit arising out of land within the meaning of section 3 of the Indian Registration Act, 1877. A lease, therefore, of such right for a period of more than one year must be made by registered instrument. A Division Bench of the Oudh High Court in Ram Jiawan and anr. .vs. Hanuman Prasad and ors., AIR 1940 Oudh 409 also....