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2014 (7) TMI 933 - AT - Service TaxDemand of service tax - Real estate agent service - Whether M/s. SRL have provided Real Estate Agent Service to M/s. SEL in terms of the Agreement between these two parties - Held that - For a service to be covered under the definition of Real Estate Agent, it should be provided by a person to another person in relation to sale, purchase, leasing or renting of Real Estate. In the present case SRL, as indicated above in para 3, purchase/obtain lease of land in their own name. Further, they are not paid any commission by M/s. SEL. In fact the commission of 11% is received from the customers as consideration for the sale/lease, in addition to the cost of acquisition of land and other expenses. Thus, it cannot be said that they have provided any service to M/s. SEL in relation to purchase and further sale/lease of land to customers of M/s. SEL. As the definition of Real Estate Agent includes a real estate consultant, it needs to be examined whether the activity of M/s. SRL would come in the ambit of real estate consultant. From the fact on record advice is not provided by M/s. SRL to M/s. SEL. In fact, it is M/s. SEL, who provide technical inputs regarding suitability of land for wind farm projects, identify the suitable land and thereafter, as per the terms of the Agreement, ask M/s. SRL to acquire/lease such land. The land has to be free of any encumbrance before transfer of such land to the customers of M/s. SEL or to M/s. SEL themselves. All the regulatory approvals benefit the purchaser of land and expenses incurred thereon are recovered from the purchaser. Thus no real estate agent service can be said to have been provided by M/s. SRL to M/s. SEL. - Even the facilitation of loans by M/s. SEL to M/s. SRL for purchase of land and mortgage thereof is a financial arrangement between two which does not make M/s. SRL, real estate agent. Such financial arrangements and the exigibility to service tax thereof is not the issue here. The books of accounts of the appellants indicate that they hold large inventory of land. No consideration has been shown to be paid to M/s. SEL by M/s. SRL because no service is rendered by M/s. SRL to M/s. SEL. - M/s. SRL have not provided service of Real Estate Agent to M/s. SEL - Decided in favour of assessee.
Issues Involved:
1. Whether M/s. SRL provided Real Estate Agent Service to M/s. SEL. 2. Determination of tax liability and penalties under the Finance Act, 1994. Detailed Analysis: 1. Whether M/s. SRL provided Real Estate Agent Service to M/s. SEL: The primary issue to be considered is whether M/s. SRL has provided Real Estate Agent Service to M/s. SEL as defined under Section 65 (88) of the Finance Act, 1994. According to the Act, a "real estate agent" is a person engaged in rendering any service in relation to the sale, purchase, leasing, or renting of real estate. Additionally, a "real estate consultant" provides advice, consultancy, or technical assistance regarding the evaluation, conception, design, development, construction, implementation, supervision, maintenance, marketing, acquisition, or management of real estate. The Tribunal examined the factual arrangement between M/s. SEL and M/s. SRL. M/s. SRL acquires land in its own name and sells or leases it to customers identified by M/s. SEL. The sale deeds are executed by M/s. SRL, and they bear all expenses during the execution of the sale. The agreement between M/s. SEL and M/s. SRL stipulates that M/s. SRL receives a commission of 11% of the total cost of acquisition, but this commission is paid by the customers, not by M/s. SEL. The Tribunal found that M/s. SRL does not provide any service to M/s. SEL in relation to the purchase and further sale/lease of land. M/s. SRL purchases or leases land in its own name and later sells or leases it out, bearing all acquisition costs independently. The Tribunal concluded that M/s. SRL is not acting as a real estate agent for M/s. SEL because they do not receive any commission from M/s. SEL and do not provide advice, consultancy, or technical assistance to M/s. SEL. 2. Determination of tax liability and penalties under the Finance Act, 1994: The Commissioner had earlier held that M/s. SRL provided Real Estate Agent Service under Section 65 (88) of the Finance Act, 1994, and confirmed a duty of Rs. 3,07,83,184/- along with interest and penalties under Sections 76 and 78 of the Finance Act, 1994. However, the Tribunal found that M/s. SRL did not provide any such service to M/s. SEL, and thus, the demand for duty and penalties was not justified. The Tribunal noted that the legal transactions indicated M/s. SRL as the purchaser and seller of land, and no consideration was paid to M/s. SEL by M/s. SRL. The financial arrangements between M/s. SEL and M/s. SRL, including loans and mortgages, do not make M/s. SRL a real estate agent. Conclusion: The Tribunal held that M/s. SRL did not provide Real Estate Agent Service to M/s. SEL and allowed the appeal with consequential relief, if any, in terms of law. The issue regarding limitation was deemed infructuous as the matter was decided on merits in favor of the appellant. Pronouncement: The judgment was pronounced in court on 4.7.2014.
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