2015 (12) TMI 210 - AT - Service Tax

Waiver of pre deposit - Real Estate Agent services - consideration received by way of administrative charges under clause 15 - Held that - Appellant is the owner of the premises where flats are being constructed. Till the sale is completed in favour of the initial allottee by execution of a written sale deed which is registered under provisions of the Registration Act, there is no sale and therefore no transfer of ownership in favour of the allottee. Till such time the title in the property continues with the appellant. Real Estate Agent Service is defined to mean a person engaged in rendering any service in relation to sale, purchase, leasing or renting of any real estate and includes a real estate consultant. The enumerated taxable service is any service provided or to be provided to a client by a real estate agent in relation to real estate. In terms of the definition real estate agent must act as the agent of the owner of real estate and thus the owner of the property cannot be a real estate agent. In terms of clause 15, since administrative charges are collected only prior to a concluded sale by the appellant in favour of third parties, the appellant continues to be owner of the real estate and therefore could not be considered an agent of his own property. - classification of the petitioner is a Real Estate Agent and levy and demand of service tax on administrative charges collected, appears fundamentally misconceived - Decided in favour of assessee.

Summary

Issues:
Classification of services under Real Estate Agent category for service tax purposes.

Analysis:
The judgment revolves around the classification of services provided by the appellant under the category of "Real Estate Agent" for service tax purposes. The Joint Commissioner had confirmed a service tax demand on the appellant for providing "Real Estate Agent" services as per the Finance Act, 1994. The crux of the issue lies in whether the consideration received by the appellant in the form of administrative charges under clause 15 of the agreements with prospective buyers should be treated as consideration for the rendition of real estate services.

The appellate tribunal analyzed clause 15 of the agreements, which specified that the appellant could collect administrative charges from allottees for authorizing a transfer of allotment rights. It was noted that until the sale was completed and a registered sale deed executed, the title in the property remained with the appellant. The tribunal emphasized that for a service to fall under the category of "Real Estate Agent," the agent must act on behalf of the owner of the real estate. Since the administrative charges were collected before the sale was concluded, the appellant, as the owner, could not be considered an agent of their own property.

Based on the above analysis, the tribunal found the classification of the appellant as a "Real Estate Agent" for levying service tax on administrative charges to be fundamentally misconceived. Consequently, the tribunal granted a waiver of pre-deposit in full and stayed all further proceedings for the realization of the adjudicated liability assessed by the Joint Commissioner. The stay application was disposed of accordingly, in favor of the appellant.