TaxTMI 
TaxTMI 
2024 (2) TMI 902
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....ax Act, 2017 (for short 'GST Act, 2017') and the Telangana Goods and Services Tax Act, 2017 (for short 'TGST Act, 2017'). The incidental relief also sought for is issuance of a writ of Mandamus declaring the Notification No. 4 of 2018-Central Tax (Rate) (Annexure P1) dated 30.09.2019 imposing GST on transfer of development rights of land by the land owners under a JDA be ultra vires the Constitution of India. 2. Heard Sri S. Ravi, learned Senior Counsel for the petitioner and Sri Dominic Fernandes, learned Senior Standing Counsel for CBIC appearing for the respondent-Department. 3. For better understanding of the dispute, it would be relevant at this juncture to briefly note the facts which led to filing of the instant writ petition which are as under: 3.1. The petitioner M/s. Prahitha Constructions Private Limited had entered into a JDA with M/s. Jitvan Land Limited and M/s. Janina Marine Properties Private Limited who are the land owners. The JDA was for development of the land belonging to the land owner Nos. 1 and 2 in the JDA admeasuring 8.30 acres forming part of plot Nos. 9, 10A and 10B in Survey No. 83/1 situated at Hyderabad Knowledge City, Raidurg Village, Serili....
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....f development rights is in the nature of transfer of immovable property or the nature of services would fall within the scope of GST? b) Whether the transfer of development rights can be safely brought within the purview of an outright sale of land? 7. Learned Senior Counsel for the petitioner agitated that the said impugned notification is ultra vires of Article 14, 246A and 265 of the Constitution of India. Particularly, for the reason that the said notification does not prescribe any methodology or offer of development rights. Thus, it becomes arbitrary and also unconstitutional. It was also contended that the said notification has been issued without there being any logical reasons for issuance of the same. It is also irrational, unreasonable and against the tenets of law. Therefore, it is liable to be quashed, stressing hard on the fact that the net result of execution of the JDA is the sale of land belonging to the land owners to the so called developer after retaining part of the area which shall be developed by the developer. 8. According to the learned Senior Counsel for the petitioner, it is the implication and the effect of execution of the JDA which has t....
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....mines the rate at which tax has to be levied on a JDA pertaining to transfer of development rights. 13. It was the further contention of the learned Senior Counsel for the petitioner that the impugned notification would amount of it being a delegated legislation and the delegated legislation cannot travel beyond the scope of substantive law. The learned Senior Counsel relied upon the judgments of the Hon'ble Supreme Court in the case of Rajasthan State Industrial Development and Investment Corporation v. Subhash Sindhi Co-operative Housing Society, Jaipur and others (2013) 5 SCC 427. Likewise, the authorities concerned cannot impose levy of tax by way of a notification. It was further contended that the notification seems to have been issued invoking the provisions of Section 148 of the CGST Act, 2017, and TGST Act, 2017. However, Section 148 does not confer either upon the respondent No. 1 or the respondent No. 2 the power to levy GST. 14. In support of his contentions, learned Senior Counsel for the petitioner further relied upon the following decisions: i. Super Poly Fabriks Ltd. v. Commissioner of Central Excise (2008) 10 STR 545 (SC). ii. Bhopal Sugar I....
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....cultural land admeasuring 8.3 0 (eight point three zero) acres forming part of Plot Nos. 9, 10A and 10B and comprised in Survey No. 83/1, all situated at Hyderabad Knowledge City, Raiduty Village, Serilingampally Mandal, R.R. District, Telangana State, the details of which are morefully described in Part A of the First Schedule hereinunder written and hereinafter referred to as "Portion I". B. Landowner II is the sole and absolute owner of the non-agricultural land admeasuring 1.82 (one point eight two) acres forming part of Plot No. 8B2 and comprised in Survey No. 8III /1, situated at Hyderabad Knowledge City, Raiduty Village, Serilingampally Mandal, R.R. District, Telangana State, the details of which are morefully described in Part B of the First Schedule hereinunder written and hereinafter referred to as "Portion II". D. The Developer is having expertise in the business of conceptualizing, planning, constructing and developing commercial real estate projects. The Landowners have approached the Developer with a view to engage its services for developing the Schedule Property as an IT/ITES and/ or commercial office project in accordance with the terms of this Ag....
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....xecution and achieving Project Completion. Under no circumstances shall it be construed that the Landowners have any privity of contact with such Vendors. In the event of disputes/claims by such Vendors from time to time, such disputes/claims shall not be the liability of the Landowners under any circumstances. 5.3. The Developer shall achieve Project Completion within 48 (forty-eight) months commencing from the Project Commencement (such 48 (forty eight) months being hereinafter referred to as "Deadline Date"). The Parties further agree that, the Developer shall be entitled for a grace period of 6 (six) months commencing from the Deadline Date without the Developer being liable to the Landowners for any penalties or damages i.e. 54 (fifty four) months from the Project Commencement Date (such (fifty four) months from the Project Commencement Date (such 54 (fifty four) months being hereinafter referred to as "Default Deadline Date"). 6.1. In consideration of the Developer agreeing to construct, develop and deliver to the Landowners the Landowners share, the Developer shall be entitled to construct, develop and absolutely own the Developer Share and receive conveyan....
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....ts, out in Annexure VIII upon the Developer providing the documentary proof towards such costs and expenses, and (ii) refund of the entire Security Deposit. Immediately upon such termination and upon payment of such costs and expenses and refund of Security Deposit, the Developer shall cease to be in permissive possession and the license to Developer in respect of the Schedule Property shall stand cancelled." 19. Referring to the aforesaid clauses of the JDA, learned Senior Standing Counsel for the respondent-Department strongly contended that upon reading of the clauses of the JDA, particularly the clauses which are reproduced in the preceding paragraphs, it gives a clear indication that there is no outright sale of property in the name of the developer. Rather, it is a case where the conditions would clearly indicate that the ownership, the title rights are all retained by the land owner himself and the only role which the developer has is the execution of JDA so far as developing of land belonging to the land owner is concerned. 20. The further contention of the learned Senior Standing Counsel for the respondent-Department is that the bar on levy of tax on sale of....
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....ts nominee(s) (subject to the terms of this Agreement), a conveyance (in the form of sale) from the Landowners of the remaining proportionate Developer UDS. It is clarified that in the event Completion of all 3 (three) Towers in the Project is achieved contemporaneously, then the Developer shall be entitled to receive conveyance (in the form of sale) of the entire Developer UDS. For the purposes of receiving sale of the Developer UDS in accordance with this Clause 6.7, the Developer shall be entitled to execute all relevant deeds and documents including sale deeds, conveyance deed etc. on behalf of the Landowners and admit execution thereof for purposes of registration before the jurisdictional Sub-Registrar of Assurances by using the authorization provided by the Landowners in terms of Clause 17 herein. Further, at the request of the Developer, the Landowners shall furnish certificate from its statutory auditor confirming that the Developer UDS is classified as stock in trade in its current financials and that there are no pending proceedings or liabilities in terms of Section 281 of the Income Tax Act, 1961 affecting the Landowners, prior to conveyance by sale of the Developer UD....
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....nditions referred to in the said JDA. There is also a condition of cancelling the contract agreement and under such situation; the entire rights over the said property would continue to remain with the landowners. This again would show that the right and title of the property even as on date stands vested with the landowners and not with the petitioner. 27. Clauses 6.1 and 6.7 of JDA further envisages that after the development, later on when the developer/petitioner hands over the completed units to the landowners, the landowners and the developer will then enter into a conveyance deed whereby the landowners will execute a sale deed to transfer the undivided share of land which would fall to the share of the petitioner towards the investment, efforts, cost of construction and expenses incurred by the petitioner in the course of developing that entire property. Thus, it is evident that the petitioner is offering construction services to the landowners in exchange for the landowners transferring the development rights to the petitioner. Only on account of the development rights thus the petitioner gets the right to enter into the land to undertake construction over the said prope....
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....rship from the landowner goes directly to the purchaser of the constructed property and not in favour of the petitioner unless and until the land stands transferred in the name of the petitioner. The same cannot be brought within the ambit of sale. Transferring of the development rights does not result in transfer of ownership rights. That the sale of land/transfer of land or undivided share of land would get executed only after issuance of completion certificate of the project. This itself would give a clear indication that the services rendered by the petitioner in execution of JDA was supplied prior to the issuance of completion certificate and would thus be amenable to GST. 31. The reliance of the circular dated 10.02.2012 i.e. Circular No. 151/2/2012-ST, may not be of any relevance for the dispute in the present writ petition as the same was issued under service tax regime under which service tax was levied only on those services which figured in the specified list of services and where sale of land by the landowner was held to be non-taxable. This definitely does not also say that the transfer of development rights would also automatically become non-taxable. 32. As reg....
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.... of Income Tax v. Balbir Singh Maini (2018) 12 Supreme Court Cases 354 though dealing with the provisions of Income Tax Act, but under similar factual backdrop in paragraph Nos. 19, 25 and 26 had held as under: "19. A plain reading of the JDA shows that it is essentially an agreement to facilitate development of 21.2 acres so that the developers build at their own cost, after obtaining necessary approvals, flats of a given size, some of which were then to be handed over to the members of the Society. Payments were also to be made by the developer to each member in addition to giving each member a certain number of flats depending upon the size of the member's plot that was handed over. What is important to bear in mind is that payments under the third instalment were only to be made after the grant of approvals and not otherwise, and that it is an admitted position that this was never done because no approvals could be obtained as the High Court ultimately interdicted the project. Also, the termination clause is of great significance because it shows that in the event of the JDA being terminated, whatever parcels of land have already been conveyed, will stand conveye....
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....to be ascertained only from the terms and conditions thereof. Neither the nomenclature of the document nor any particular activity undertaken by the parties to the contract would be decisive." 38. As far as the various judgments cited by the learned Senior Counsel for the petitioner which are reflected in paragraph No. 14, if we look into the facts of each of those judgments, it will be evidently clear that all those judgments were rendered under an entirely different factual backdrop unconnected and unrelated to the issue involved in the present case. In view of the same, without dealing with each of those cases separately, we are of the considered opinion that those judgments and the principles laid down in those judgments cannot be made applicable in a straight jacket manner/formula to the facts of the present case. 39. On conjoint reading of the clauses under JDA, clause d of the JDA along with clause 2.2, 2.3, 2.4, 6.1, 6.7 and 23.4 (all of which stands reproduced in the preceding paragraphs of this order) it will clearly indicate that there is no automatic transfer of ownership given to the petitioner at the time of execution of the JDA. That until the completion of the....