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TMI Blog2019 (6) TMI 1146X X X X Extracts X X X X X X X X Extracts X X X X ..... wner at the office of the Registrar for execution of the sale deed. In fact Sahara India instead of paying the price directly to the land owner, paid lump sum amount to the appellant. From the perusal of Memorandum of Understanding (MoU) between the appellants 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 owner of the land and the average rate shall be payable to the second party (appellant) . It is very clear from the provision of the MoU that the amount payable to the appellant is not quantified and it is more of in the nature of margin (profit/loss). We hold that for levy of service tax, a specific amount (consideration for service) has to be agreed between the service recipient and the service p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue involved in these appeal(s) is whether the Appellants are liable to service tax under the category Real Estate Agent Services as defined under Section 65(88) read with Section 65(89) 65(105) (v). Appellant Name SCN/PERIOD Place/Site Area of Land (in acres) Amount received for procuring land Amount received (Cum-tax value) Service Tax Demand M/s.Elegant Developers SCN dt.22.04.2010 (1.10.2004) to 1.3.2007) Sriganganagar Varodara Kurukshetra 118.60 120.232 Nil 19,00,86,272 11,89,28,069 82,06,63,550 17,24,92,080 10,79,20,208 74,47,03,766 1,75,94,192 1,10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vadodara 25.12.2002 146.84 12,40,000 Kurukshetra 17.08.2005 150 38,45,000 7. Under the MOU, Sahara India had agreed to pay a Fixed average rate‟ per acre of land to be purchased by Sahara India, which land would be identified, divided and demarcated by the appellant firm, together with necessary documents and other formalities. The MOU for each site specifically provided the obligations of both the parties. It specifies that Sahara India had agreed to procure land at the aformentioned locations, at the fixed average rate per acre, which included all the cost of land, development expenses. The obligations of the appellant under the MOU were- (a) divide and demarcate the entire land into the blocks of 20 to 30 acres, (b) purchase the land in contiguity block wise, (c) furnish title papers and other necessary documents for the land to be purchased (d) obtain the permission and approval from the concerned authority for transfer of land and the expenses inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10.3 Thereafter the appellant shall obtain and furnish, each and every other necessary permission/ approval from 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. 10.4 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. 10.5 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. 10.6 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 cultivato ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all necessary help so as to get the work of mutation completed. M/s Mercury Estate 11. Under more and less similar facts and circumstances, the appellant - M/s Mercury Estate entered into an agreement for procurement of land for Sahara India for the sites viz. Allahabad and Jodhpur. 12. Further, the appellant has also entered into an agreement with SICCL, wherein the appellant has agreed to develop such land located at Jodhpur by performing various activities like levelling of soil including filling of gorges/nallah and removing of shrubs, grass and rubbish, etc. for the work of development and clearance. As aforementioned, the appellant received a separate remuneration of ₹ 3,68,41,520/- from SICCL for the site clearance and development work. In respect to Allahabad site, the appellant has not procured any land but had acquired land in two limited companies (promoted by them) out of the fund provided by Sahara India Ltd. and these companies were subsequently transferred to M/s.Sahara India against the advance money received. 13. M/s City Linkers Associates were registered with the service tax department un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Project site Total Sriganganagar Rs. Vadodara Rs. Kurukshetra Rs. Rs. 1 Opening Balance as on 01.10.2004 74783069 ....... 74783069 2 Amount received by M/s ED after 01.10.2004 190086272 44145000 820663550 1054894822 3 Total advance amount with M/s.ED. 190086272 118928069 820663550 1129677891 (II) M/s Mercury Estate Details of amount Project site ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Ld. Commissioner, and the proposed demand was confirmed along with interest and equal amount of penalty was imposed under Section 78, along with further penalty under Section 77. The proposed penalty under Section 76 was dropped. Further personal penalty on Shri Rajat Yadav of ₹ 10,000/-, under Section 77(c) of the Finance Act was imposed. Being aggrieved, the appellant(s) are in appeal before this Tribunal. 19. The learned counsel for the appellant urges that the appellant is not a real estate agent. Appellant is not acting as an agent of Sahara India and is in fact transacting on a principal to principal basis. Therefore there can be no question of levying service tax on its business, alleged as service in relation to real estate. The object clause of the partnership deed states that the parties thereto have organised themselves to purchase/sale, develop, exchange or otherwise acquire, whether for investment or sale in real estate including land, among others. Under each of the MOU Sahara India has agreed to pay the appellant an average fixed rate, per acre of land, to be purchased by Sahara India through or from the appellant. Real estate agent service beca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in it has been held as follows: On the other hand, the service referred to with section 65(105)(v) which refers to a service provided by real estate agent in relation to real estate, does not, obviously, include the subject matter as a service. This is so because the real estate by itself cannot by any stretch of imagination be regarded as a service. Going back to the structured sentence, that is service provided to A by B in relation to C , it is obvious that C can either be a service such as dry cleaning, hairdressing, et cetera or not a service by itself, such as real estate. 21. Thus in order to tax somebody under section 65 (105)(v), it has to be 1st shown that some service has been rendered by the person to some other person, which is not so in the present case. The Adjudicating Authority has failed to even consider this aspect of the matter and merely gone by the definition of Real estate agent , without considering the applicability of this section, which is evident. Further no consideration has been received by the appellant from Sahara India, for the alleged taxable service under the MOU. 22. In so far as the advance rece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be payable in case of there being a loss. This negates the rendition of any service, apart from showing lack of consideration. Mere sale and purchase of land against profit or loss does not involve any service. Sale and purchase can be outright, or can be upon booking, or in any other manner. Reliance is placed on the ruling of this Tribunal in the case of Commissioner of Service, New Delhi vs. Karam Freight Movers- 2017(4) GSTL 215 (Tri-Delhi), wherein it was held that income earned by assessee, to be considered as a taxable service under any service category, must be shown in lieu of provisions of a particular service. Earning profit on a mere sale and purchase of cargo space in the process, is not a taxable activity under the service tax law. It is also held that such an activity is on principal to principal basis, and not an activity for the client. The said principle it is submitted, fully applies to the facts of the present case. The words in the agreement difference if any , is not consideration for service, is evident from the words if any itself, which clearly suggests that so-called consideration itself may or may not be there. This emphatically shows ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vied in the present case. The contention of the Ld. Commissioner that since the land cost is capable of being known, in the facts of the present case, the profit, if any, amounts to being the consideration for service, is completely erroneous. It have also been held in the said decision that when the Finance Act levies service tax, it only levy service tax on those activities which are for providing services simplicitor and it does not provide for levy of service tax on an indivisible transaction. 25. It is further submitted that if the contention of the Department is to be accepted, it will result into an absurd situation holding the profit element of a purchase/sale transaction of land, as the consideration for alleged real estate service. Further, the loss/deficit, as in case of City Linkers, the same can never be consideration for service. 26. The learned counsel further assails the show cause notices for invocation of extended period of limitation. There is no cause or justification for invocation of extended period of limitation. The only allegation in the show cause notice for invoking, is failure to disclose. The other allegation is that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e services of connecting various land owners with Sahara India, after scrutinising the suitability of land, authentication of documents of title. Further the MOU entitled the appellant to keep the difference amount with them (average price of land as agreed minus the price of land as per the sale deed). Once it is established that the services were provided and due consideration for that has been received by the appellant, the liability for payment of service tax definitely arises. The terms of an MOU between two private parties cannot determine or circumvent the service tax liability, when it is apparent that consideration has been received for the services so provided. The argument of the appellant that the terminology the difference if any, shows that there may be a condition, when there is no difference,(Supra), cannot determine the tax levy. Further the appellant failed to prove in even a single instance, wherein the difference/profit was not there. It is further a fact that the land/real estate was never transferred in the name of the appellant, and accordingly the appellant was in the shoes of agent/consultant. Further from the agreement/MOU it is evident that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to examine the title of the prospective land owner and to further ensure the availability of land owner at the office of the Registrar for execution of the sale deed. In fact Sahara India instead of paying the price directly to the land owner, paid lump sum amount to the appellant. Thereafter the appellant identified the land, the seller, and after being satisfied with the title of the seller, entered into agreement with the seller and obtained power of attorney, in their favour. Thereafter the appellant transferred the land in favour of Sahara India. Thus, we find that the transaction is one of trading in land, appellant(s) may have surplus / profit or incur loss. 32. From the perusal of Memorandum of Understanding (MoU) between the appellants 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or meeting common expenses of a group of persons aggregating for identified common objectives will not meet 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. 33. We hold that since the spec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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