TaxTMI 
TaxTMI 
2025 (7) TMI 1077
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....hereinafter referred to as the said agreement). The project was awarded by RDA to GIPL and its development was to be on the basis of 'Build, Own Operate and Transfer '[BOOT] during the project period. The department observed that as per the condition mentioned in article 6 of the said agreement, the Developer (GIPL) was made responsible for the operation and maintenance of the project and all the utilities, facilities and amenities including sewerage, sanitation, electricity and water connection, other civic amenities and obtaining necessary permission from appropriate authorities for the same initially and till the completion of the project, personally. It was also agreed that after the completion of project construction and execution of lease deed, the above functions of operation and maintenance of the project facilities shall be discharged by the developer but through a separate corporate entity i.e. Special Purpose Vehicle (SPV) to be constituted by the Developer (GIPL) with the participation in its Board of Directors such that the total No. of Directors should not be more than 8 at any point of time. These directors were agreed to be the representative of the commercial....
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....iding taxable services. But since the Appellant did not provide any document specifying the exact nature of services rendered to RDA, department formed the opinion that the appellant has rendered the same set of services to RDA as enumerated in para 5 of the Show Cause Notice as that of Operation and Maintenance of Mall Project Premises. These services rendered by the Appellant to RDA have been alleged to fall under the category of "Business Auxiliary Services" as defined under erstwhile Section 65(105)(zzb) of Finance Act 1994. 2.5 The Appellant is a regular Service tax assessee and they are self-assessing and paying service tax on regular intervals under the head 'Business Auxiliary Service ' with respect to the amount they were receiving from the other commercial users of the Mall/Multiplex. Department alleged that the appellants were similarly required to pay service tax on the income received from RDA, being received for rendering for 'Business Auxiliary Services ' to RDA. But neither the tax has been paid nor the income has been shown in the said returns. 2.6 Based on these observations that the show cause notice no. 66/2016-17 dated 11.02.2017 was served up....
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....and in favour of M/s Gupta Infrastructure (India) Pvt. Ltd. (M/s GIPL) has submitted its bid for a total licence fees of Rs. 41,00,51,000.00/-. The agreement dated 11.11.2005, was executed for the development of the project on a Build, Own, Operate and Transfer (BOOT) during the Project period on the terms and conditions of this Agreement. 4.2 Based on these broad submissions, Ld. Counsel for appellant further elaborated the submissions as follows: - • Income for Parent Company Not Taxable: The income received from M/s GIPL, the parent company of the appellant for maintaining the mall is denied to be taxable income under the Finance Act, 1994. The appellant has already paid service tax on amounts collected from customers for services rendered to them. Therefore, the income from its parent company, which is a sharing of income and not a payment for services, should not be taxed under the category of Business Auxiliary Services • Lack of Evidence: The show cause notice assumed that the income shown in the profit and loss account is from Business Auxiliary Services but has failed to provide evidence to support this assumption. The income ....
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.... and same services were provided to RDA as part of its core function. As apparent from the agreement between RDA and the developer, the SPV was obligated to provide maintenance and operation services for the area earmarked for RDA. These services were not exempted nor are covered under the negative list of section 66D of the Finance act, 1994, thus were subject to service tax. The adjudicating authority has confirmed the service tax demand of Rs. 41,23,267/- along with interest and penalty on the ground that the amount as mentioned in article 6 of the agreement dated 11.11.2005, i.e. Rs. 66,63,329/- was indeed for the provision of taxable services, and as such, was subject to service tax under Section 66B of the Finance Act. Thus, the findings of O-I-O are impressed to be correct and sustainable. 5.1 Learned Authorized Representative also relied upon Point of Taxation Rules, 2011. As per Rule 2A thereof, "date of payment" has to be the earliest of the dates on which the payment is entered in the books of accounts or is credited to the bank account of the person liable to pay tax. With these submissions and impressing upon no infirmity in the Order-in-Appeal under challenge, the ....
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.... fighting System 7. Repairs & Maintenance of the Elevators & Escalators 8. Maintenance of terrace 9. Any other facilities of common concern of the Project users, visitors and the local authorities 7. We also observe and hold that: • There is admittedly, no agreement between appellant and RDA. Hence no privity of contract between the two. The agreement dated 11.11.2025 on basis of which show cause notice has been issued is the agreement between Developer (GIPL) & RDA. The appellant was not in existence at the time of said agreement which talks about its creation but after the completion of project by Developer and to act on behalf of developer. • The agreement is between RDA, the owner of project land and Developer, M/s GIPL who acquired leasehold rights in extendable to 90 years w.r.t. the said land on BOOT full term also basis. Thus the transaction amounts to 'Deemed Sale" in terms of article 366(29A) of the constitution of India. • The developer got rights to develop a Mall Project of several commercial units on the said project land and to sell those units to individual buyers. • The Develope....
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.... 3.1.2.3 It is clarified that while the payment received by RDA from the sharing of the amounts deposited in the Escrow Account shall be adjusted against the Annual Installments payable in accordance with the Payment Schedule, the obligation of the Developer to make payments in accordance with the Payment Schedule is independent of the aforesaid sharing arrangement and will have to be met by the Developer irrespective of whether any amounts are credited/ deposited in the Escrow Account. Accordingly, in case the aggregate of RDA's share of quarterly receipts in a year do not equal the annual installments payable in accordance with the Payment Schedule the Developer shall be required to make good the shortfall. Further, in the event there is excess credit on the annual settlement of the amounts received by RDA from the Escrow AR Account, such excess shall be adjusted towards the next Annual installment, which remains unpaid, in accordance with the Payment Schedule." • There is no denial to the fact that developer 's contribution to the said Escrow amount was @ Rs. 2000/- per commercial unit per month out of the rent (inclusive of maintenance charges) received from le....
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....ideration received by the appellant for rendering a taxable service defined under section 65 (b) 44 of Finance Act 1994. However, in show cause notice (para 12) the nature of the activity detailed in aforesaid article 6 is alleged to be that of business auxiliary service as defined under section 65 (105) (zzb) of Finance Act 1994. Apparently, the contents of para 12 of show cause notice are contradictory irrespective that the concept of classification service is not relevant w.e.f. Jul 2012 after the concept of negative list in section 66 D of Finance Act was incorporated. 9. In the light of above discussed observations and findings, the issue to be adjudicated is crystallized as follows: - Whether the funds shared for appellant/SPA by the Developer and RDA both of whom agreed for the said Special Purpose Vehicle (SPV) to be constituted at a later stage, in terms of the agreement dated 11.11.2005, for carrying out O&M functions but on behalf of the developer, can be called as consideration for rendering a taxable service of nature of Business Auxiliary Service? 9.1 Foremost we have pursued the definition of 'Service ' in section 65 B (44) Finance Act 1944 it....
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.... promisee is the party to which a promise is made. The definition draws meaning from the Latin term "quid pro quo," which means "something for something." It states that each party entering into a contract should offer something to the other party. The definition clarifies that the Consideration Must Be at the Desire of the Promisor. For consideration to be valid, it must be given at the promisor's request. In Durga Prasad v. Baldeo, the plaintiff constructed a market at the district collector's request, and shopkeepers later promised to pay him a commission. The court held that the contract was void because the plaintiff acted on the collector's request, not the shopkeepers ', making the consideration invalid. (ii) SERVICE HAS TO BE CARRIED OUT BY A PERSON FOR ANOTHER: 9.3 'provided by one person to another ' signifies that services provided by a person to self are outside the ambit of taxable service. Example of such service would include a service provided by one branch of a company to another or to its head office or vice-versa. There are two exemptions of this:- - an establishment of a person located in taxable territory and another establishment ....
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....he agreement dated 11.11.2025 in light of last para of article 3 is the consideration for rendering taxable service (BSS) to RDA. Both the articles are perused. Relevant para of the article reads as follow: - Article-6 Operation & Maintenance of the Project "The Developer shall also be responsible initially and till the completion of the project for the operation & maintenance of the Project and all the utilities, facilities and amenities, including sewerage, sanitation, electricity and water connection, other civic amenities and obtaining necessary permissions from appropriate authorities for the same. After this phase of project construction and execution of the lease deed, the above functions of operation and maintenance of the project facilities shall be discharged by the Developer through a separate corporate entity i.e. a Special Purpose Vehicle (SPV) to be Constituted by the Developer with participation in its Board of Directors (total number of Directors should not be more than 8 at any point of time) from the representatives of the Commercial Users (not being more than four in number) and representation from (A)-Developer (One in number)....
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....in the event there is any default in payment of any Annual installment towards the License Fees in accordance with the Payment Schedule. It is clarified that in the event the Bank Guarantee is encashed by RDA pursuant to default in payment of the License Fees, in accordance with the Payment Schedule, the Developer shall provide a fresh Bank Guarantee for the balance installment of license fees remaining to be paid at that point of time including the cost/ losses/damages, if any, incurred by RDA due to such Encashment/devolution of the Bank Guarantee." From the article 6 of the agreement dated 11.11.2005, as reproduced above it is clear that SPV / appellant was agreed by RDA to be constituted by the developer after completion of project with participation in its board of director, 8 in number including one from the developer itself and two from the RDA, the parties to the agreement dated 11.11.2005. Thus, the SPV / appellant is nothing but the creation of public private partnership between Government (RDA) and private parties (the developer). There is no relationship between RDA & SPV as that of Promisor - Promisee. Hence there is no possibility of relationship of service provide....
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.... supply of service Completion of respective events as per the contract entered 15. However from the defence submission right from the stage of reply to show cause notice, the appellants stands is that no amount was ever received by the appellants from RDA and by the authority no invoice was ever issued. The amount as shown in the books is shown as receivable instated of being show as received. But the same has not been considered, while invoking the Point of Taxation Rules. There is no evidence on record to show that the invoice was ever issued by the Appellant to RDA, though the invoices were issued to the commercial users of the Mall and the service tax on the amount received from them already stands discharged by the developer. Nor there is any evidence that the amount in question was ever received by the appellant. On the contrary appellant has placed on the record, the chartered accountant certificate to certify that the annual amount of 66,63,329/- for the financial year from 2011-12 to 2015-16 (Rs. 3316645) though was receivable from RDA but was never paid and finally got written of in financial year 2021-22. The SCN is held to have wrongly recorded that the amount was....
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....n to, - (i) promotion or marketing or sale of goods produced or provided by or belonging to the client; or (ii) (ii) promotion or marketing of service provided by the client; or [****] (iii) (iii) any customer care service provided on behalf of the client; or (iv) procurement of goods or services, which are inputs for the client; or [Explanation.- For the removal of doubts, it is hereby declared that for the purposes of this sub-clause, "inputs" means all goods or services intended for use by the client;] [(v) production or processing of goods for, or on behalf of the client; (v) provision of service on behalf of the client; or (vi) a service incidental or auxiliary to any activity specified in sub-clauses (i) to (vi), such as billing, issue or collection or recovery of cheques, payments, maintenance of accounts and remittance, inventory management, evaluation or development of prospective customer or vendor, public relation services, management or supervision, and includes services as a commission agent, [but does not include any activity that amounts to "manufacture" of excisable goods." ....