TaxTMI 
TaxTMI 
2026 (1) TMI 567
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....mited under Section 194J of Income Tax Act, 1961 and for which no explanation was provided indicating it to be non-taxable income. Hence, the said amount of Rs. 91,177/- appears to be income arising out of services, which are taxable nature under the provisions of the Act ibid aforesaid. It is also noted that the Party received an amount of Rs. 34,45,00,000/- towards Sale of Development Rights as per Balance Sheet of 2016-17. Since development right is a right to develop the land for agricultural, residential or commercial use, it does not result into transfer of ownership of the land in totality but only the aspectual right to develop the land is transferred; hence, it appears that transfer/sale of such development right does not get covered under the exclusion clause of Section 65B(44) or get covered under Section 66D of the Act ibid, implying thereby that the same is covered under the definition of "service", as provided under Section 65B(44) of the Finance Act, 1994 and is thus, susceptible to levy of Service Tax. Thus, the value of taxable services works out to Rs. 34,45,91,177/- (Rs. 34,45,00,000/- + Rs. 91,177/-) for the year 2016-17. 5.4 Whereas, for the year 2017-....
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.... (emphasis supplied) 4. It would be seen that the demand raised in the show cause notice relates to a consideration of Rs. 34,45,00,000/- said to have been received by the appellant under the two agreements and an amount of Rs. 2,19,099/- + 91,177/- i.e. Rs. 3,10,276/- said to have been received by the appellant as income shown under section 194(J) of the Income Tax Act, 1961 [the Income Tax Act]. 5. The appellant filed a reply to the show cause notice and denied the allegations made therein. Apart from contesting the demand proposed in the show cause notice on merits for the reason that there is no liability to pay service tax on transfer of development rights as it was actually a case of transfer of immovable property and that the appellant was also not liable to pay service tax on income received on which TDS was deducted under section 194(J) of the Income Tax Act as the amount was within the threshold limit of Rs. 10 lakhs, the appellant also contended that the demand was barred by time under the provisions of section 73(1) of the Finance Act and in any case the extended period of limitation under the provisio to section 73(1) of the Finance Act could not have been invok....
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....rty' and transfer of 'immovable property are two distinct activities and transfer of one can not lead to transfer to another activity. In terms of Section 3 (26) of the General Clauses Act, 1897 'immovable property' includes land, benefits to arise out of land, and things attached to earth or permanently fastened to anything attached to the earth. Since the transfer of land development rights for consideration, does not involve transfer of title in immovable property, by way of sale, gift or in any other manner, such activity appears rightly covered under the definition of 'service' for leviability of service tax on the consideration involved. I find that as per the both the Development Agreements entered into between the land owner and the developer in the instant case, the land owner did not transfer or sold the title of the land to the developer and the developer did not purchase the land or immovable property from the land owner. In view of the above, with effect from 01.07.2012, I find that sale of development rights for consideration, is covered under the definition of taxable services as it does not involve transfer of title in immovable property, by....
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....as to whether transfer of development rights would be a transaction in immovable property or a service was debatable; (iii) Transfer of development rights is transfer of immovable property and, therefore, no service tax is payable in view of the exclusion clause contained in section 65B(44) of the Finance Act. In support of this contention, learned counsel place reliance upon the decisions of the Tribunal in DLF Commercial Projects Corporations vs. Commr. Of S.T., Gurugram [2019(27) G.S.T.L. 712 (Tri.-Chand.)] and Amit Metaliks Limited vs. Commissioner of CGST, Bolpur [2020 (41) G.S.T.L. 325 (Tri.-Kolkata)]; and (iv) The department had to substantiate that the income shown under section 194(J) of the Income Tax Act was leviable to service tax and in any case the amount was within the threshold limit of Rs. 10 lakhs as provided for in the Notification dated 20.06.2012. 12. Shri Anand Narayan, learned authorized representative appearing for the department, however, supported the impugned order and submitted that it does not call for any interference in this appeal. Learned authorized representative submitted that transfer of development rights is a taxable servic....
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....id Memo issued by the DTCP. E. In pursuance of the aforesaid License granted by the DTCP and after obtaining approval of zoning plans, building plans and other requisite approvals, sanctions, permissions and licenses and in accordance with applicable laws, byelaws, rules and regulations etc. the Owner Company is desirous of developing the Total Land as Cyber/IT Park consisting of various towers(s) / block(s) of different sizes and dimensions to be developed for construction of individual Building(s)/Tower(s) thereon alongwith support infrastructure, utilities and services (hereinafter referred to as the 'Total Project'). F. The Developer is well established in the business of real estate development and has significant expertise in developing, promoting, marketing and sell of Commercial Complexes, Malls, Integrated Townships, Commercial and Residential Buildings, IT/Cyber Park projects in various parts of Northern India and is desirous of acquiring the development rights in respect of 50% FSI equivalent to 4,54,997.5 Sq. Ft. out of Total FSI of 9,09,995 square feet of the Said Land or as approved by Regulatory Authorities according to the zoning plans (hereina....
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....A in favour of the Developer. 2.4 The Developer shall co-operate and take all necessary steps with the Owner Company for obtaining all the Approvals from Director Town and Country Planning, Chandigarh, Haryana and Regulatory Authority(ies) for the development of Project on the Said Land and upon receipt of the Sanctioned Plans and all Approvals, the Developer shall commence the development and construction on the Said Land and complete the Development and construction of the Complex. 2.5 It is specifically agreed between the Parties that the Developer shall make best efforts and shall be responsible for obtaining approvals in respect of the Project on the Said Land within 1.5 (One and half) years from the Effective Date or within such extended time as the Parties may mutually decide. The Developer shall be responsible for informing the Owner Company on the expiry of the said period of 1.5 (One and half) years from the Effective Date about the receipt or non-receipt of the approvals, as the case may be. ***** 4.1 In consideration of the Owner Company transferring and assigning their exclusive development rights over the Said Land and other rights ....
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....e same either by itself or through competent contractors and sub-divide the work or appoint sub-contractors or enter into suitable agreements with the Co-Developers, as it may deem fit and proper. The Developer shall be entitled to exploit the maximum permissible F.S.I. over the Said Land. 8.2 The Parties have agreed that a fixed consideration is payable by the Developer to the Owner Company for the grant of development rights and other rights and entitlements granted by the Owner Company to the Developer in respect of the Said Land and the Owner Company shall have no interest in the Project and/or area developed on the Said Land." (emphasis supplied) 17. The agreement dated 16.12.2011 is between the appellant (First Party) and Advance India (Second Party). The relevant clauses are as follows: "C. The First Party further represents that in pursuance of the above said License no. 86 of 2010 dated 23 October 2010, total FSI admeasuring to 8,95,416,235 sq. ft. approximately on the Total Land has been permitted for setting up a Cyber/IT Park (hereinafter referred to as the "Total FSI") as follows: Category FSI in Sq. ft. IT AREA 8,73,576.822 COMME....
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....ng on confirmations, representations and assurances of the First Party, has agreed and accepted the right for development of AIPL Project including the right to: (a) lease and/or license the Leasable Area/Units; (b) book, allot, sell, transfer the Saleable Area/Units; (c) sell, transfer AIPL FSI (d) to receive proceeds in its own name on account of the booking amount, instalment or other consideration/charges payable by the Prospective Buyer(s)/Prospective Lessce(s). ***** 4. TOTAL CONSIDERATION 4.1 Subject to the terms and conditions of this Agreement, the First Party agrees to grant exclusive rights to the Second party to: (a) undertake development of AIPL Projects; (b) lease and/or license the Leasable Area/Units; (c) book, allot, sell, transfer the Sealable Area/Units; (d) sell, transfer AIPL FSI; (e) to receive proceeds in its own name on account of the booking amount, instalment or other considerations/charges payable by the Prospective Buyer(s)/ Prospective Lessee(s) and other rights and entitlements in respect of AIPL Project including rights of AIPL &....
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.....2011 16,00,00,000/- 20. The aforesaid payments are in conformity with the agreement dated 16.12.2011 entered into between the appellant and Advance India and the agreement dated 18.05.2011 entered into between the appellant and Splendor. The said payments are also recorded as advance received in the balance sheets of the appellant for the Financial Years 2011-12 and 201213. The balance sheet for the Financial Year 2011-12 is at page number 125 of the Appeal Memo and shows an advance of Rs. 16,00,00,000/- from Splendor and an advance of Rs. 11,93,25,00/- from Advance India. The relevant portions of the Notes to the Financial Statements for year ended 31.03.2012 containing the disclosure of related party transactions during the year 2011-12 are reproduced below: BAAKIR REAL ESTATES LIMITED NOTES TO FINANICAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2012 Disclosure of Related Party Transactions during the Year 2011-12 The followings transactions were carried out with the related parties in ordinary course of business: Nature of Transactions Associates 31-Mar-12 31-Mar-11 Transactions during the year ....
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....ears 2011-12 and 201213. It is not the case of the department that the payment was made after the issuance of the invoice. Thus, it is these dates that have to be considered for the purpose of calculation the limitation and not from the year 2016-17. 24. In M/s. SPML Infra Limited vs. Commissioner of CGST & Excise, Kolkata South [Service Tax Appeal No. 75620 of 2017 decided on 28.07.2022], the Tribunal held that the demand has to based on the basis of the amount realized. The relevant portion of the order is reproduced below: "4.4 In our view the entire demand has been made against the four issues referred in the show cause notice as Issue No 1 to 4 is based on the entries recorded in the book of accounts toward the expected revenue and expense recognition and not on the basis of the actual amounts realized against the contracts undertaken by the appellant. 4.5 The Service tax is paid on the basis of the revenue realized towards the provision of the taxable services and not on the basis of the revenue recognition. Impugned order do not point out a single case whereby the amounts realized by the appellant against any of the project undertaken by the appellant we....
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....ed that these facts came to the notice of the department. The show cause notice, therefore, invokes the extended period of limitation contemplated under the proviso to section 73(1) of the Finance Act while proposing the demand. 29. The Commissioner, while dealing with this aspect of the invocation of the extended period of limitation, observed that it is only after the investigation of the records that the element of non-payment of service tax was detected and such an act of suppression can be considered as an act performed with mala fide intention to evade payment of service tax. 30. The contention of learned counsel for the appellant is that there cannot be any intent to evade payment of service tax as the transactions were duly recorded in the Financial Books of Account of the appellant for the Financial Years 2011-12 and 2013. In this connection, learned counsel placed reliance upon a decision of the Tribunal in M/s. Wellworth Project Developers Private Limited vs. Commissioner of CGST, New Delhi [Service Tax Appeal No. 50259 of 2014 decided on 10.01.2025]. Learned counsel for the appellant further submitted that in any view of the matter what is involved in the present ....
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....ent to escape payment of duty. The observations are as follows; "4. Section 11A empowers the Department to reopen proceedings if the levy has been short-levied or not levied within six months from the relevant date. But the proviso carves out an exception and permits the authority to exercise this power within five years from the relevant date in the circumstances mentioned in the proviso, one of it being suppression of facts. The meaning of the word both in law and even otherwise is well known. In normal understanding it is not different that what is explained in various dictionaries unless of court the context in which it has been used indicates otherwise. A perusal of the proviso indicates that it has been used in company of such strong words as fraud, collusion or wilful default. In fact it is the mildest expression used in the proviso. Yet the surroundings in which it has been used it has to be construed strictly. It does not mean any omission. The act must be deliberate. In taxation, it can have only one meaning that the correct information was not disclosed deliberately to escape from payment of duty. Where facts are known to both the parties the omission by one to ....
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....llant, and Mr. Mukul Gupta, learned senior counsel appearing on behalf of the Revenue. We are not convinced by the reasoning of the Tribunal. The conclusion that mere non-payment of duties is equivalent to collusion or willful misstatement or suppression of facts is, in our opinion, untenable. If that were to be true, we fail to understand which form of nonpayment would amount to ordinary default? Construing mere nonpayment as any of the three categories contemplated by the proviso would leave no situation for which, a limitation period of six months may apply. In our opinion, the main body of the Section, in fact, contemplates ordinary default in payment of duties and leaves cases of collusion or wilful misstatement or suppression of facts, a smaller, specific and more serious niche, to the proviso. Therefore, something more must be shown to construe the acts of the appellant as fit for the applicability of the proviso." (emphasis supplied) 37. It would also be appropriate to refer the decision of the Delhi High Court in Mahanagar Telephone Nigam Ltd. vs. Union of India and others [W.P. (C) 7542 of 2018 decided on 06.04.2023]. The Delhi High Court observed that merely becaus....
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....as payment for taxable service does not establish that it had willfully suppressed any material fact. MTNL‟s contention that the receipt is not taxable under the Act is a substantial one. No intent to evade tax can be inferred by non-disclosure of the receipt in the service tax return." (emphasis supplied) 38. In The Commissioner of Central Tax, Bangalore North Commissionerate vs. M/s. ABB Limited, Maneja Works [Central Excise Appeal No. 16 of 2021 decided on 01.06.2022], the Karnataka High Court held that when the amount was recorded in the balance sheet it is not possible to accept the contention of the department that the trading activity was not known to the department and that it was learnt on the basis of intelligence report. 39. It is, therefore, clear from the aforesaid discussion that the extended period of limitation could have been invoked only if there was suppression of facts with intent to evade payment of service tax. 40. In the present case, as noticed above, the appellant had disclosed the receipt of consideration in the balance sheet for the Financial Years 2011-12 and 2012-13. There is only a mere allegation in the show cause notice that s....
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....putes of interpretation of legal provisions, it would be totally unjustified to invoke the extended period of limitation by considering the assessee's view to be lacking bona fides. In any scheme of self-assessment it becomes the responsibility of the assessee to determine his liability of duty correctly. This determination is required to be made on the basis of his own judgment and in a bona fide manner. 24. The extent of disclosure that an assessee makes is also linked to his belief as to the requirements of law. *****. On the question of disclosure of facts, as we have already noticed above the assessee had disclosed to the department its pricing policy by giving separate letters. It is also not disputed that the returns which were required to be filed were indeed filed. In these returns, as we noticed earlier there was no separate column for disclosing details of the deemed export clearances. Separate disclosures were required to be made only for exports under bond and not for deemed exports, which are a class of domestic clearances, entitled to certain benefits available otherwise on exports. There was therefore nothing wrong with the assessee's action of including th....
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....the duty of the proper officer to have scrutinized the correctness of the duty assessed by the assessee and if necessary call for such records and documents from the assessee, but that was not done. It is, therefore, not possible to accept the contention of the learned authorized representative appearing for the Department that the appellant should have filed a proper assessment return under rule 6 of the Rules. 25. Departmental instructions to officers also emphasise upon the duty of officers to scrutinize the returns. The instructions issued by the Central Board of Excise & Customs on December 24, 2008 deal with "duties, functions and responsibilities of Range Officers and Sector Officers". It has a table enumerating the duties, functions and responsibilities and the relevant portion of the table is reproduced below: ***** 26. The Central Excise Manual published by CBEC on May 17, 2005, which is available on the website of CBEC, devotes Part VI to SCRUTINY OF ASSESSMENT. ***** 27. It is thus evident that not only do the 2002 Rules mandate officers to scrutinise the Returns to verify the correctness of self assessment and empower the of....
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.... any, are disposed of." 48. The aforesaid discussion leads to the inevitable conclusion that even the extended period of limitation could not have been invoked in the facts and circumstances of the case. Whether the consideration received under the two agreements is leviable to service tax 49. The show cause notice and the impugned order mention that the appellant received an amount of Rs. 34,45,00,000/- towards sale of development rights as per the balance sheet of 2016-17 and since development rights do not result into transfer of ownership, it would not be covered by the exclusion clause of section 65B(44) of the Finance Act and, therefore, would be a service provided by the developers as defined under section 65B(44) of the Finance Act. 50. The issue, therefore, that arises for consideration is whether the consideration received under the two agreements for transfer of development rights would be exigible of service tax. 51. To examine this issue, it would be pertinent to examine the two agreements dated 18.05.2011 and 16.12.2011 entered into between the appellant and the two developers, Splendor and Advance India. The relevant portions of the agreements ha....