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TMI Blog2019 (5) TMI 1299X X X X Extracts X X X X X X X X Extracts X X X X ..... een the land owning company, M/s DLF Ltd. and the prospective buyers and documents of transfer of title were executed at that time. It shows that in the entire transaction, the LOCs remain the owner of the land and as per the agreement, the development activities is taken place and thereafter developed property was sold by M/s DLF Ltd as per tri-pirate agreement to the prospective buyers upon execution of sale deed of land by the LOCs. Admittedly, from the facts of the case, it emerges that the advance to purchase of land given by M/s DLF Ltd to the appellant which has been further given to the LOCs to purchase the land who ultimately purchased the land. The activity of the appellant would have been started only after acquisition of land and thereafter to procure NOC from the various Govt. Authorities and thereafter development activities on the land. The agreement which is based in this case dated 02.08.2006 does not say that the appellant have actually transferred the development rights - when the appellant never remain the owner of the land at the time of receiving the advance from M/s DLF Ltd. against purchase of land by the appellant, how can be the appellant transfer the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut of land can be equated to transfer of development rights of land or not? - the transferrable development right is immovable property, therefore, the transfer of development rights in the case in hand is termed as immovable property in terms of Section 3 (26) of General Clauses Act, 1897 and no service tax is payable as per the exclusion in terms of Section 65B(44) of the Finance Act, 1994. Extended period of limitation - HELD THAT:- From time to time the query was made to the Revenue by the trade organization as well as M/s DLF Ltd whether they are liable to pay service tax on transfer of development right of land or not and the same was not answered till yet which means revenue itself is not clear whether the said activity is taxable service or not. In that circumstances, we hold that the extended period of limitation is not invokable and it cannot be said that the appellant did not pay service tax with malafide intentions. The activity in question which is only acquisition of land, therefore, no service tax is payable by the appellant in terms of Section 65B(44) of the Finance Act. Therefore, whole of the demand against the appellant is not sustainable. Consequently, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dustrial park, information technology parks, special economic zones and the like alongwith the rights, interests, and benefits appurtenant and attached hereto (Development Rights); b) DCPC have represented to DLF that the Development Rights to be acquired by the DCPC are capable of further assignment. Relying on the said representations DCPC, DLF agree to purchase of the Development Rights from DCPC; c) DCPC have agreed to assign the Development Rights to M/s DLF or any of their (DLF) affiliate, nominee(s) for consideration; d) DLF shall grant advance of such amounts (Advance) to DCPC from time to time as may be mutually agreed upon; e) DLF and DCPC agree that price payable by DLF for the Development Rights shall be first set-off/adjusted from the Advance given by DLF to DCPC and the balance price, if any shall be paid by DLF by way of a crossed cheque; f) DCPC shall be responsible for obtaining requisite approvals, documents including power of attorney from land owners that DLF may require form time to time for effectively carrying out the development of the said land; g) D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arious Companies (who owns land) to the Appellant and the Appellant, in turn, transferred the development rights either to M/s. DLF Limited and/or its associate or outside parties and also on account of renunciation of development rights. (ii) M/s. DLF Limited as per agreement dated 02.08.2006 gave Business Advance of ₹ 1424.83 crores to the Appellant from time to time for the purpose of purchase of land/development rights. The Appellant, in turn, transferred the very same amount in the nature of Refundable Performance Deposit to various companies to enable them to purchase land (hereinafter called Land Owning Companies ). The land owning Companies purchased the lands in the State of Haryana. It was the responsibility of the Appellant to obtain / arrange license from the Government of Haryana for the purpose of developing the land located in the State of Haryana. (iii) The SCN was issued by the Department on the wrong and fallacious premise that the amount of ₹ 1424.83 Crores is nothing but the value of development rights and, therefore, the Service Tax is payable on the amount of ₹ 1424.83 Crores and, therefore, demand of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A vide Certificate dated 30.4.2018 certified that the Appellant neither purchased the land nor purchased the Development Rights . Further, the said certificate also says that the appellant had not transferred any Development Rights either to DLF Ltd or its associates. (vii) The Annual Accounts of the Appellant for the year 2012-13, 2013-14, 2014-15, 2015-16 and 2016-2017 have been produced which show under the heading Year ended March 31, 2012 , the income of ₹ 8,81,75,460/- has been shown as Sale of Development Rights . This income does not appear under the Year ended March 31, 2013 . Likewise, no amount is appearing towards sale of Development Rights under Year ended 31.03.2014 and under the heading Year ended March 31, 2015, no amount is appearing as Sale of Development Rights and further under the heading Year ended 31.03.2016, no amount is shown towards Sale of Development Rights . Further, under the heading Year ended 31.03.2017 no income is appearing under the head Sale of Development Rights . (viii) It is, therefore, manifestly clear that except for the year 2012, for none of the subsequent years i.e. 2013-14, 2014-15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sold by the land owning Companies nor there was transfer of any development rights by the said land owning Companies in favour of the Appellant. At the same time, there is also CA certificate dated 30.04.2018 certifying that Appellant had neither transferred any land nor Development Rights either to DLF Ltd or to its Associates. If at all, there would have been any transfer of development rights then SCN would have been issued to the land owning companies this itself confirms, affirms and establishes that there was no transfer of development rights by these land owning companies. (xiii) Further, the Appellant received ₹ 1424.83 Crores from M/s. DLF Limited, from time to time, and the very same amount has been remitted to various land owning companies as Performance Deposit . No fees, charges or compensation has been received by the Appellant from M/s. DLF Limited. Therefore, assuming, if any service has been rendered by the Appellant, though stoutly denied, such purported service was without any consideration and, therefore, no service tax was payable because no consideration has been received. MEANING OF THE WORD BENEFIT ARISING OU ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er transfer of development rights is a benefit arising out of land so as to fall under immoveable property . The word benefit arising out of land, has been interpreted in the following judgments:- a) Bahadur other Vs.Sikandar MANU/UP/0016/1905 b) Ananda Behera Vs. State of Orissa AIR 1956 SC 17 c) SmtDropadi Devi Vs. Ram Das AIR 1974 All 473 d) Sadoday Builders (P) Ltd Vs. Jt Charity MANU/MH/07912011 e) Chheda Housing Development Corpn Vs. Bibijan Shaikh 2007 (2) Bom CR 587 (xvii) The authorization given to a Developer to develop the land and sell super-structure in perpetuity shall undisputedly fall within the words benefit arising out of the land and shall, therefore, be held to be immovable property . Once there is a transaction in relation to immovable property, that shall, undisputedly, fall outside the purview of Service within the meaning of Section 65B(44) and consequently, no Service Tax shall be payable under Section 66. (xviii) Further, the Ld Commissioner in the OIO in the case of M/s DLF Limited) noted our submission to say that In the present case, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een defined to mean the date of completion of the purchase of the scheduled property including the mutation thereof, NEPL in Revenue Records and the vesting of the right, title and interest in the scheduled property in favour of NEPL, which shall be communicated in writing to the developer of NEPL. (xxii) There is an Apartment Buyer Agreement, which is entered into in all cases at the time of allotment of the flat/space wherein the word foot print has been explained. Foot Print shall mean the precise land underneath the said building. Further in this very agreement, there is a clause No.1.17 (II), which clearly reads as under:- II. The Allottee shall have the ownership of undivided proportionate shares/interest in the foot print of the said building calculated in the ratio of super area of the said agreement to the total super area of all apartments within the said building. The allottee acknowledges and understand that no other land(s) is/are forming part of this agreement and the allottee shall not have any right, title or interest of any kind whatsoever on any other land(s) whether inside or outside the said complex except to the extent of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elopment rights. Consequently, on 15.02.2013, M/s. DLF Limited seeking clarification as to whether the Service Tax is payable on transfer of development rights. The Government did not say that any Service Tax is payable on transfer of development rights and, therefore, the period subsequent to 15.02.2013, M/s DLF did not pay Service Tax on the alleged renunciation of development rights. However, in relation to the booking income prior to 15.02.2013, the Appellant paid Service Tax of ₹ 99,05,304/- on 30.12.2013 and also paid interest thereon to the tune of ₹ 15,39,432/. It would kindly be appreciated that after our letter dated 15.02.2013 to the Govt. seeking clarification as to whether the Service Tax is payable on transfer of development rights or not and receiving no response from the Government, the Appellant did not pay Service Tax on income arising due to capital appreciation, to which, the Department calls Renunciation of Development Rights . (xxviii) In para 17.1 of SCN, it is alleged that DCPC has transferred the land development rights in favour other persons/builders/developers without conferring the title of the land and for which transfers th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Agreement says that the Development Rights had been actually transferred. (xxxiii) Para 4 (I) of the SCN, it is stated that:- (I) The DCPC provided development rights without transferring the title of land to DLF and for transfer of development rights received consideration from DLF but failed to pay Service Tax. (II) In few cases, DCPC surrendered land development rights to third party other than DLF and in lieu of surrendering land development rights, received monetary consideration but failed to pay Service Tax. (xxxiv) These observations are completely not supported by any evidence whatsoever. However, as regards the alleged surrendering of development rights, it is submitted that it is sharing of profit upon sale of land and, therefore, by no stretch of imagination, could be taxable as service. (xxxv) As per the agreement it can be discerned that a. DLF would provide fund to DCPC for purchasing the development rights from land owning companies. b. DCPC would purchase development rights from land owning companies and transfer those developments rights without an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent to suggest that any development rights have been transferred by land owning companies to DCPC. To this effect, M/s. Prem Arun Jain Co, Chartered Accountants has given a certificate dated 3.5.2016 and also M/s. Prem Arun Jain Co, Chartered Accountants, have also given a certificate dated 30.4.2018 clearly stating that no development rights have been transferred by the land owning Companies to DCPC and similarly, DCPC have also not transferred any development rights to either DLF or any other person. Again, there is absolutely no document or instrument to suggest there was actual transfer of development rights by DCPC to DLF Limited. (xxxix) Further, in the last five years, repeatedly, various Trade Forums including Confederation of Real Estate Developers Association of India, Northern Region, sent a representation dt.14.8.2014 to the Joint Secretary, Ministry of Finance, Government of India, New Delhi and one of the member of Big Fours CA Firms sent various communications to the Government seeking clarification/confirmation about the levy of Service Tax on Development Right and the Government never, in the past, viewed that the Service Tax is at all payabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. M/s DLF Limited (DLF) provided business advance or an ad-hoc fund to DCPC for procuring development rights from other companies. This business advance was given for specific purpose i.e. to acquire Development Rights which was other than the loan, provided by DLF to DCPC, for example the balance of such loan was ₹ 247.83 crores as on 31.03.2015 and ₹ 554.47 crore as on 31.03.2014. These loans carry an interest rate of 12% per annum. Whereas, the business advances were interest free. The accounts of DCPC show that many times a part of such business advance or ad hoc fund had been returned to DLF, if such fund was not used by DCPC for procuring development rights from other companies. In the show cause notice service tax has been demanded only on that amount which was used by DCPC (out of total business advance or ad hoc fund) for procuring development rights from their companies. (viii) It is correct that the Business Development Agreement dated 02.08.2006 permits the Appellant to pay the amount to various companies who will acquire the land and simultaneously development rights of such land shall be transferred to Appellant. The above said Agreeme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that DCPC received advances from DLF to procure Development Right and transferred the development rights to DLF. (x) The above said Business Development Agreement dated 02.08.2006 shows that DCPC agreed to provide development rights to DLF. The provisions of the Finance Act, 1994 ( Act‟) and rules made thereunder provides that service provider is liable to pay service tax on the consideration received against the services agreed to be provided inasmuch as Section 67(1) of the Act which is for valuation of taxable services for charging service tax, provides that in a case where the provision of service is for a consideration in money, be the gross amount charged by the service provider for such service provided or to be provided for the purposes of this section consideration includes any amount that is payable for the taxable services provided or to be provided. Further, Rule 3 of the Point of Taxation Rules, 2011 provides as under- For the purposes of these rules, unless otherwise provided, point of taxation‟ shall be,- (a) The time when the invoice for the service provided or agreed to be provided is issued: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of SCN, under which DCPC transferred the development rights to DLF or under sale deeds to other real estate developers but did not transfer the title of land along with development rights to recipients of service at any point of time. The Development Agreement dated 05.12.2006, under which DCPC had acquired the land development rights, the para 2.2 of the agreement (RUD-9 to SCN), specifically mentioned as under: The parties agree that nothing contained herein shall be construed as delivery of possession in part performance of any agreement of sale, under Section 53A of the Transfer of Property Act, and/or such other applicable law for the time being in force. It is clarified that M/s Red Topaz Real Estate Private Ltd. (PREPL) shall be the owner of the Scheduled Property only for carrying out the development activities. 5. Heard the parties and considered the submissions. 6. On hearing the parties, the sole issue emerges before us is whether the appellant has transferred any land development right in favour of M/s DLF Ltd. or not? To decide the issue, we have to go to the facts of the case, we find that as per the bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to M/s DLF Ltd, it means that when the appellant never remain the owner of the land at the time of receiving the advance from M/s DLF Ltd. against purchase of land by the appellant, how can be the appellant transfer the land development right to M/s DLF Ltd. 9. We also take a note of the fact that the Ld. AR disputed that the amount received by the appellant is paid by DLF Ltd. to the appellant for acquisition of development rights. It is a fact on record that the appellant is not the owner of the land, therefore, how can he transfer development rights to M/s DLF Ltd. and as per the records, the amount given by M/s DLF Ltd. has been transferred by the appellant to various LOCs for purchase of the land. Therefore, it is mere transaction of the sale and purchase of land or purchase of land by the appellant for DLF Ltd. for further development. As appellant did not get any ownership of the land, in that circumstances, transfer of development right does not arises. There is no such agreement placed on record that any LOCs (who are the owner of the land) has transferred any development rights to the appellant. If so, how much the consideration paid by the appellant and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erest in the land also stand transferred under the Deed of Conveyance on which stamp duty has been paid and the Deed of Conveyance has been registered before the Sub-Registrar. 11. From the above, it is a factual aspect of the case that the amount remitted by M/s DLF Ltd to the appellant is towards the acquisition of land by the LOCs which the said payment received from M/s DLF. Ltd was transferred to LOCs for acquisition of land. Further, no physical acquisition of land was taken over by the appellant. Consequently, the appellant have no right to transfer land development to M/s DLF Ltd. 12. From the above, it is clear that the appellant has not transferred any land development right to M/s DLF Ltd. or its subsidiary nominees etc. 13. We also take a note of the fact that similar facts enumerate from the case of Premium Real Estate Developers vs. CST-Service Tax, Delhi in Appeal No. ST/50103-50104/2014 wherein the facts of the case are as under:- 2. The appellant Premium Real Estate Developers , New Delhi is a partnership firm and is in the business of real estate trade. The main objective of the partnership firm is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erned authority for transfer of land and the expenses incurred in this regard, would be borne by the appellant firm, (e) bring the owners of the land for the purposes of negotiating, registration, etc , to the relevant places and bear all the expenses involved on these. The MOU further provided that the other expenses like stamp duty/registration charges, mutation charges would be borne by Sahara India. On satisfaction by Sahara India about the fitness of deal(s) for the land, appellant firm shall organise the registration in the name of Sahara India, after making the payment to the owners of land, from the advance amount given to them for the purchase of land. The difference, if any, between the amount actually paid to the owners of land and the average rate per acre settled between the parties as indicated, would be payable to the appellant firm, as their margin or profit. Further Sahara India had reserved its right to withhold 50 per cent of the amount (out of margin) to ensure that the obligations on the developer/appellant are fully discharged in terms of the MOU, and in case there was any serious default on the part of the appellant, the same could be made good by way of forf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the Government body/competent authority, or other regulatory authority, required for transfer of the land proposed, and further arrange for the purchase of land proposed under the MOU, at the average agreed rate per acre, within two months or within such further time at the discretion of Sahara India. 6.4 All expenses for obtaining proof of title and approval (except for ULC clearance) required for the transfer of title in the land shall be borne by second party, that is the appellant, and all the supporting documents furnished in respect thereof shall reflect the latest position of the ownership of land. 6.5 Thereafter scrutinising the papers relating to title, the first party- Sahara India shall enter into an agreement of sale with the owners of the land, after payment of advance/signing amount, in favour of the cultivators/owner of the land. 6.6 Thereafter having completed and covered the entire land(area) under the MOU through agreement(s) to sell, the appellant shall thereafter get the sale deed(s) executed by the cultivators/owners of land in favour of Sahara India or its nominees, after payment of remaining amount towa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ared to Revenue that the appellant was liable to pay the service tax under the classification Real Estate Agent Service (introduced with effect from 1 st October,2004) under section 65(88) of the Finance Act which defines a real estate agent as a person who is engaged in rendering any service in relation to sale, purchase, leasing and renting, of real estate and includes a real estate consultant. In the above stated facts which are similar to facts of this case, this Tribunal vide Final Order No. 53322-53323/2018 dated 27.11.2018 observed as under:- 28. From the perusal of Memorandum of Understanding (MoU) between the appellant and M/s Sahara India Ltd. It is very obvious that MoU is not only for providing purely service for acquisition of the land but involves many other function such as verification of the title deeds of the persons from whom the lands are to be acquired and obtaining necessary rights for development of the land from the Competent Authority. The remuneration or payment for providing this activity has actually not being quantified in the MoU. The MoU provides that the difference, if any, of the amount being actually paid to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the criteria of taxation under Finance Act, 1994 in the absence of identifiable service that benefits an identified individual or individuals who make the contribution in return for the benefit so derived. 13. Neither can monetary contribution of the individuals that is not attributable to an identifiable activity be deemed to be a consideration that is liable to be taxed merely because a club or association is the recipient of that contribution. 14. To the extent that any of these collections are directly attributable to an identified activity, such fees or charges will conform to the charging section for taxability and, to the extent that they are not so attributable, provision of a taxable service cannot be imagined or presumed. Recovery of service tax should hang on that very nail. Each category of fee or charge, therefore, needs to be examined severally to determine whether the payments are indeed recompense for a service before ascertaining whether that identified service is taxable. 29. We feel that since the specific remuneration has not been fixed in the deal for acquisition of the land we are of the view that b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of information from the revenue. Accordingly, we hold that the extended period of limitation is not applicable. 14. Now, we deal with the legal aspect of the case. Section 65B(44) of the Finance Act, 1994 defines the services and excluded certain activities which are as under:- any 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 deemed to be a sale within the meaning of clause (29A) of Article 366 of the Constitution, or (iii) a transaction in money or actionable claim; As per the said provisions, the transfer of title in goods or immovable property, by way of sale, gift or in any other manner is not a service and no service tax is payable thereon. 15. As immovable property has not been defined in the Finance Act, 1994, therefore, as per Section 3 (26) of the General Clauses Act, 1897, the immovable property means as under:- (26) immovable property shall include land, benefits to arise out of land, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Can FSI/TDR be said to be a benefit arising from the land. Before answering that issue we may refer to some judgements for that purpose. In Sikandar and Ors. Vs. Bahadur and Ors. 27 ILR 462 a Division Bench of the Allahabad High court held that right to collect market dues upon a given piece of land is a benefit arising out of land within the meaning of Section 3 of the India Registration Act, 1877. A lease, therefore, of such right for a period of more than one year must be made by resitered instrument. A Division Bench of the Oudh High Court in Ram Jiawan and Anr. V. Hanuman Prasad and Ors. AIR 1940 Oud 409 also held, that bazaar dues, constitute a benefit arising out of the land and therefore a lease of bazaar dues is a lease of immovable Allahabad High court in Smt. Dropadi Devi v. Ram Das and Ors. MANU/UP/0120/1974 : AIR1974AII473 on a consideration of Section 3 (26) of General Clauses Act. From these judgments what appears is that a benefit arising from the land is immovable property. FSI/TDR being a benefit arising from the land, consequently must be held to be immovable property and an Agreement for use of TDR consequently can be specifically enforced, unle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... azaar dues, constitute a benefit arising out of the land and therefore a lease of bazaar dues is a lease of immovable property. A similar view has been taken by another Division Bench of the Allahabad High Court in Smt.Dropadi Devi vs. Ram Das and ors., AIR 1974 Allahabad 473 on a consideration of section 3(26) of General Clauses Act. From these judgments what appears is that a benefit arising from the land is immovable property. FSI/TDR being a benefit arising from the land, consequently must be held to be immovable property and an Agreement for use of TDR consequently can be specifically enforced, unless it is established that compensation in money would be an adequate relief. 6. The Division Bench has held that since TDR is a benefit arising from the land, the same would be immoveable property and therefore, an agreement for use of TDR can be specifically enforced. The said dictum of the Division Bench is later on followed by a learned single Judge of this court in 2009(4) Mh.L.J.533 in the matter of Jitendra Bhimshi Shah ..vs.. Mulji Narpar Dedhia HUF and Pranay Investment and ors. The learned judge relying upon the judgment of the Division Bench in Chheda Hou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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