2011 (12) TMI 405 - AT - Service Tax

Real estate agent s service - service tax demand alongwith imposition of penalty Held that - To levy the service tax, it shall have to be proved that the person acted as a real estate agent - while acting as the real estate agent , the person concerned should have provided service of sale, purchase, leasing or renting of real estate - assessee had very clearly stated at the time of investigation itself that he collected administrative charges for effecting the changes in his records - a service even if provided for consideration only to make few change about sale or purchase of real estate in the records without being the causative factor for such sale or purchase is not taxable service in favour of assessee.

Summary

Issues:
Service tax liability for real estate agent's service, applicability of administrative charges, interpretation of real estate agent's service definition, limitation on demand.

Analysis:
The judgment by the Appellate Tribunal CESTAT, New Delhi, dealt with the confirmation of service tax liability against the appellant for providing services falling under the category of real estate agent's service. The appellant, engaged in construction and sale of residential and commercial buildings, charged administrative expenses for correcting entries in their records when a prospective buyer transferred their right to purchase. The appellant argued that these charges were to cover administrative costs and did not constitute real estate agent services to the ultimate buyer. The proceedings were initiated based on the recovery of administrative charges as real estate agent services, but the appellant contended that they did not meet the definition of a real estate agent under the Finance Act, 1994, and challenged the demand on the grounds of limitation.

The Tribunal considered a decision in a similar case involving the appellant's sister concern, where the demand for service tax was dropped as the appellant did not act as a real estate agent causing the sale or purchase of real estate. The Tribunal highlighted that activities only involving recording changes in real estate transactions without being the causative factor for the sale or purchase were not taxable services under the Act. It was emphasized that services must be directly or indirectly linked to the sale or purchase of real estate to be considered taxable. The Tribunal also referenced a case involving Puravankara Projects Ltd., where it was observed that charges collected in transfers of ownership were not received for services rendered as a real estate agent, leading to the demand not being sustainable under that category.

Considering that other appellants in similar situations were granted stay, the Tribunal unconditionally allowed the present stay petition. The judgment provided a detailed analysis of the definition of a real estate agent's service, emphasizing the need for services to be causative factors in real estate transactions to be considered taxable. The decision highlighted the importance of establishing a direct or indirect link between services provided and real estate sale or purchase to determine service tax liability accurately.