TaxTMI 
TaxTMI 
2019 (5) TMI 1490
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....the appellant is required to pay service tax 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, ....
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....re liable to pay service tax on their activity. Accordingly, the show cause notice was issued to the appellant which 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 dat....
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....pplied by the service provider to the service receiver. The "Service" has been defined U/s 65 (44) in the following words:- The relevant portion of Section 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 atta....
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....ance Act, 1994 and obviously not exigible to Service Tax. xii) Further, in the last five years, repeatedly, various Trade Forums including Confederation of Real Estate Developers Association of India, Northern Region, sent a representation dt.14.8.2014 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....
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....joying it, but for removing something from it, namely, a part of the produce of the soil." (iv) Mandatory / essential clause in the agreement for transfer of development rights. Normally all the Agreements for transfer of development rights consists of following mandatory clause:- "the activity should not be construed as delivery of possession in part performance 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 Constituti....
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....ment with DCPC wherein DCPC have agreed to assign or transfer all the development rights acquired from Land Owning Companies (LoCs) who are subsidiary or associated companies of DLF group. DCPC entered development agreements with various LoCs wherein DCPC acquired sole irrevocable development rights which had been acquired or would be acquired by these LoCs. The development rights acquired by DCPC from LoCs were transferred to DLF. These development rights were acquired/transferred without transfer of title of land and without executing the sale deed of land. Since 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, ....
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....e is not issued within the time period specified in rule 4A of the Service Tax Rules, 1994, the point of taxation shall be the date of completion of provision of the service; in a case, where the person providing the service, receives a payment before the time specified in clause (a), the time, when he receives such payment, to the extent of such payment In view of Rule 3(b) provider of development rights is liable to pay service tax even before the incident of transfer of development rights, if any, advance payment have been received. (h) If there was transfer of title of the specified land along 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....
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.... rights have been considered as taxable and provisions have been made by the constitutional body viz. GST Council. Hence, it can be concluded from above, that the activities performed by the Appellants w.r.t. grant of Development Rights are firstly a 'service' and secondly 'taxable' as per Finance Act 1994. The Ld. AR also reiterated the findings of the impugned order. 6. Heard the parties and considered the submissions. 7. On hearing the parties, we find that in this case on the basis of the facts of the case which are based on various agreements relied in the show cause notice alleges that the appellant has acquired land development right from 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....
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.... case dated 02.08.2006 does not say that the appellant have actually transferred the development rights. In fact, the said agreement is futuristic in nature which says that in further on acquisition of land, the appellant shall transfer the development rights to M/s DLF Ltd, it means that when the appellant never remain the owner of the land at the time of receiving the advance from M/s DLF Ltd. against purchase of land by the appellant, how can be the appellant transfer the land development right to M/s DLF Ltd. 9. We also take a note of the fact that the Ld. AR disputed that the amount received by the appellant is paid by DLF Ltd. to the appellant for acquisition of development rights. It is 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, tr....
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....ce Deed/Sale Deed is executed in future. We further observe that it is not only the possession, which stood transferred with the right to use, enjoy and construct building/super structure, but, at the same time, undivided right, title and interest in the land also stand transferred under the Deed of Conveyance on which stamp duty has been paid and the Deed of Conveyance has been registered before the Sub-Registrar. 11. From the above, it is a factual aspect of the case that the amount remitted by M/s DLF Ltd to the appellant is towards the acquisition of land by the LOCs which the said payment received from M/s Dlf. Ltd was transferred to LOCs for acquisition of land. Further, no physical acquisition of land 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 fac....
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....ion charges, mutation charges would be borne by Sahara India. On satisfaction by Sahara India about the fitness of deal(s) for the land, appellant firm shall organise the registration in the name of Sahara India, after making the payment to the owners of land, from the advance amount given to them for the purchase of land. The difference, if any, between the amount actually paid to the owners of land and the average rate per acre settled between the parties as indicated, would be payable to the appellant firm, as their margin or profit. Further Sahara India had reserved its right to withhold 50 per cent of the amount (out of margin) to ensure that the obligations on the developer/appellant are fully discharged in terms of the MOU, and in case there was any serious default 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....
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....rough agreement(s) to sell, the appellant shall thereafter get the sale deed (s) executed by the cultivators/ownersof land in favour of Sahara India or its nominees, after payment of remaining amount towards purchase. Where there are several coowners in a 'Khata' (entry in the land record) the second party/appellant shall ensure that all the co owners execute the document (sale deed) at one time. In no case shall any document be executed by part co owners. That in the case the land is owned by minor, lunatic or an insane person, appellant will get appropriate guardianship certificate from the competent court/authority and agreement to sell shall be executed only with such guardian. In case any dispute is pending before any civil court or revenue Court, regarding title, share or for partition of the property, the appellant will try its 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. ....
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.... for providing this activity has actually not being quantified in the MoU. The MoU provides that "the difference, if any, of the amount being actually paid to the owner of the land and the average rate shall be payable to the second party (appellant). It is very clear from the provision of the MoU that the amount payable to the appellant is not quantified and it is more of the nature of a margin and share in the profit of the deal in purchase of land. We feel that for levy of service tax, a specific amount has to be agreed between the service recipient and the service provider. As no fixed amount has been agreed in the MoU which have been signed between the parties, the amount of the remuneration for service, if any is not clear in this case. In this regard, we also take shelter of this Tribunal's decision in the case of Mormugao Port Trust vs. CC, CE&ST, Goa - 2017 (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 specifi....
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....hat since the specific remuneration has not been fixed in the deal for acquisition of the land we are of the view that both the parties have worked more as a partner in the deal rather than as an agent and the principle, therefore we are of view that taxable value itself has not acquired finality in this case. 30. It is also seen that some of the MoUs were not fully executed at the time of the issue of the show cause notice for example, in the case of MoU dated 15/11/2003 entered between Sahara India Ltd. and the appellant, the agreement is for provisioning of 100 acres of land at Village Rora, Distt. Lalitpur, U.P. and for this purpose an amount of Rs. 6,75,00,000/- have been remitted for land cost andan amount of Rs. 1,66,50,000/- have been remitted for the purpose of stamp duty and registration. Thus, a total amount of Rs. 8,41,50,000/- have been remitted to the appellant out of which a total amount 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....
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....and, and things attached to the earth, or permanently fastened to anything attached to the earth; 16. On going through the said definition, the immovable property includes land benefit arising out of land. In the case of transfer of development rights of the land, therefore, it is to be seen in the legal aspect whether the benefit arising out of land can be equated to transfer of development rights of land or not? The said issue has been examined by the Hon'ble Allahabad High Court in the case of Bahadur and Others vs. Sikandar and Others wherein the Hon'ble Apex Court observed as under:- "Therefore, the principal question we have to consider is whether the right to collect dues upon a given piece of land, the property of the alleged lessor, is a benefit to arise out of land within the purview of Section 3 of the Registration Act. In our opinion, the right to collect dues upon a given spot is such a benefit, and therefore, we are constrained to find that 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 ....
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....ld be an adequate relief." Further, the issue was examined by the Hon'ble High Court of Bombay again in the case of Shadoday Builders Private Ltd. and Ors. Vs. Jt. Charity Commissioner and Ors (supra) wherein the issue was in respect of sale of transferrable development right is immovable property or not? The Hon'ble High Court observed as under:- "5. The principal issue which arose before the learned Joint Charity Commissioner as to whether the TDR could be termed as a movable property, is concluded and is no more res integra in view of the judgment of the Division Bench of this court reported in 2007(3) Mh.L.J. 402 in the matter of Chheda Housing Development Corporation ..vs.. Bibijan Shaikh Farid and ors. Para no.15 of the said judgment is material and is reproduced hereunder. 15. The question is whether on account of the term in the clause which permits acquisition of slum TDR the appellants insofar as the additional F.S.I. 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....
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....roperty would be attached to such an agreement to use TDR. In view of the judgments of this court (supra), in my view, the order of the Charity Commissioner that no permission under Section 36 is required as TDR is a movable property cannot be sustained and therefore, the application filed by the respondent no.2 - Trust under Section 36 of the said Act would have to be considered on the touch stone of the said Section 36 and also on the touch stone of the principles applicable to such a sale by a Trust." As the Hon'ble High Court observed in the case of Sadoday Builders Private Ltd. and Ors. (supra) that transferrable development right is immovable property, therefore, the transfer of development rights in the case in hand is termed as immovable property in terms of Section 3 (26) of General Clauses Act, 1897 and no service tax is payable as per the exclusion in terms of Section 65B(44) of the Finance Act, 1994. 17. We also take a note of the fact that from time to time the query was made to the Revenue by the trade organization as well as M/s DLF Ltd whether they are liable to pay service tax on transfer of development right of land or not and the same was not an....