TaxTMI 
TaxTMI 
TaxTMI 
2025 (7) TMI 1077
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....t). 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 user (not more than 4 in Numbers) and Repre....
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....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 upon the appellants invoking the extended period of limita....
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....ed 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 was otherwise shown as receivable. * Function of Special Purpose Vehicle (SPV): The primary purpose of appellant, as....
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....nd 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 appeal is prayed to be dismissed. 6. Having heard both the parties, the rival contentions and from the perusal of the records of the appeal memo, it is observed that the Raipur De....
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....ween 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 Developer only had undertaken the responsibility of O&M operations with respect to project land and the Project Mall. Till the completion of project, developer had to personally discharge the said responsibility and after the completion thereof, the said responsibility was to be undertaken by SPV, the appellant, but on behalf of the developer only. Thu....
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....rrespective 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 lesees of those units RDA contribution was 6.5% to be deposited annually out of the amount of lease rent The payment by RDA for sake of SPV since prior the formation of SPV can be nothing more than grant / aid for appellant to carry on its activities. * The appellant admittedly was discharging service tax liability on the amount was being as received from commercial units monthly as payment towards O&M activities for ....
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....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 its read as follows: "Section [65B. Interpretations. - In this Chapter, unless he context otherwise requires, - (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 (ii) such transfer, delivery or supply of any goods which is dee....
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....er 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 of such person located in non-taxable territory are treated as establishments of distinct persons. - an unincorporated association or body of persons and members thereof are also treated as distinct persons. Implications of these deeming provisions are that inter-se provision of services between such persons, deemed to be separate persons, would be taxable. For example, services provided by a club to its members and services provided by the branch office of a multinational company to the headquarters of the multi-national company located out....
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....ecessary 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), (B)- RDA (Two in number) and (C) -State Government representation (One in number). The constitutional and incorporation documents of the said entity shall be in the form acceptable to RDA except any modification in the representation/constitution of the Board of such entity, which shall remain as explained above. The Developer shall also ensure that a minimum amount of Rs. 2000/- per Sq. Mtr. Out of the money/ lease proceeds collected by the Developer from the Project Users shall be transferred to the said entity for utilization in discharging its functions towards operati....
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....ced 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 provider - service recipient between the two. Para 3.1.2.3 as already reproduced above corroborates that the amount to be paid by RDA was not quid pro quo for alleged taxable service. More so far the reason that RDA area was not got earmarked and the amount mentioned in article 6 was never received by the appellant (para 6.4 of the article as reproduced above) 13. It is also observed that while confirming the impugned demand the adjudicating authority below have invoked Rule 2A of Point of Taxation Rules 2011 (Para 6.11 of the order in appeal). The Rules reads as follows: - "Date of Payment (Rule 2A): The new rule has be....
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....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 received by the appellants from RDA. The SCN is liable to be rejected on this ground alone. The adjudicating authority is held to have wrongly ignored the relevant submissions. 16. From Article 6 of the agreement dated 11.11.2005, it is also clear that SPV / appellant was entrusted with operational and maintenance of the entire mall and not merely of the 4000 sq mtr area owned by RDA. The said 4000 sq mtr area apparently, never got earmarked. No document has been perused by the department to falsify the same. As already observed above there is no specific agreement for maintenance and operation of 4000 sq mtr executed between the appellant and RDA. These observations are sufficient to hold that there is no ....
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....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." Perusal of both the definition are makes it clear that the activities mentioned in para 5 of the SCN cannot be categorized under BSS. Though after introduction of concept of negative list w.e.f. 01.07.2012 in the Finance Act, the concept of classification of service has got redundant but for the purpose of arriving at the assessable value or as to whether any exemption is available to the activity, the true nature of the activity has to be looked into. Since the department has wrongly mentioned the nature of impugned activities of operations and Management which are purely in nature of repairs and maintenance as BSS, the SCN itself is not sustainable. Confirmation of the proposal of such SCN is liable to be set aside. 19. Finally coming to the plea of limitation as has been raised for the appellant, we observe that the show cause notice dated 11.04.2017 covers....