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TMI Blog2020 (5) TMI 415X X X X Extracts X X X X X X X X Extracts X X X X ..... er Point, Cunnhingham Road, Bengaluru - 560 052 (herein after referred to as Appellant) against the advance Ruling No. KAR/ADRG 119/2019 dated 30th Sept 2019 = 2019 (11) TMI 994 - AUTHORITY FOR ADVANCE RULING, KARNATAKA. Brief Facts of the case: 3. The Appellant is a Private Limited Company engaged in the business of property development. The Appellant has entered into a Joint Development Agreement (JDA) on 08/11/2017 with Land Owners for development of land into residential layout along with specifications and amenities. Cost of development shall be borne by Appellant. The consideration was agreed on revenue sharing basis in the ratio of 75% [for Land Owners] and 25% [for Developer / Appellant]. Pursuant to the JDA, the Appellant entered into an agreement with customers for sale of developed plots of land for consideration. 4. In this connection the Appellant sought an advance ruling in respect of the following question: a) Whether the activity of development and sale of land attracts tax under GST? b) If the answer to the above question is yes, for the purpose of taxable value, whether provision of Rule 31 can be made applicable in ascertaining the value of land and supply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of unsold plots, as to whether Land Owners are liable to pay any consideration to the Appellant or not. Therefore, in the absences of consideration flowing from Land Owners, it cannot be construed that, Appellant had agreed to execute work to the Land Owners for consideration. The Appellant drew attention towards Circular No. 109/03/2009, Dated: 23/02/2009 issued under the erstwhile Service Tax Law wherein it was clarified that, "Another type of arrangement is where the contract between the theatre owner and the distributor is on revenue sharing basis i.e., a fixed and pre-determined portion i.e., percentage of revenue earned from selling the tickets goes to the theater owner and the balance goes to the distributor. In this case, the two contracting parties act on principal-to-principal basis and one does not provide service to another. Hence, in such an arrangement the activities are not covered under service tax". They submitted that the principle laid down in the above clarification is squarely applicable to their case. 6.3. The Appellant further submitted that, in the case of sale of developed plots, the principal supply is land and development activity is incidental to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... land does not attract GST. 6.5. The Appellant further submitted that the ruling by the lower Authority that the Appellant has no title, right or interest in the property and thereby does not become owner of the property to claim as sale of land, is not acceptable under law. They submitted that the words owner & ownership are neither defined under GST Law nor under Transfer of Property Act; that in the absence of such definitions, it is an accepted rule that, it has to be understood in its popular and commercial sense with reference to the context in which it occurs; that Owner is the person who owns property. On the other hand, Ownership is the state of fact of exclusive right and control over the property, which may be in object land or any other property; that ownership involves multiple rights such as right to enjoy, right to use, right to dispose etc; that Ownership is of different kinds. There are absolute and limited, sole ownership, co-ownership, vested ownership, contingent ownership, corporeal, incorporeal; that in the Appellant's case, since the Appellant has right in the project to the extent of 25% of total revenue, which is obtained / derived from JDA, it can be c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asized the fact that the Appellant was engaged solely in development of land and there was no construction activity involved; that what is sold to the buyers is plotted land and by virtue of entry 5 to Schedule III, sale of land was not a supply and hence not liable to GST. He also relied on the case of Continental Builders and Developers, Bangalore vs State of Karnataka (2009 (67) Kar L.J. 359 (tri) (FB)) and SUNIL Vs CIT AIR 1986 SC 368 = 1985 (9) TMI 7 - SUPREME COURT in support of their case. DISCUSSIONS AND FINDINGS 8. We have gone through the records of the case and considered the submissions made by the Appellant in their grounds of appeal as well as at the time of personal hearing. 9. We find that the Appellant has sought for condonation of delay of 21 days in filing the present appeal. The impugned order of the lower Authority dated 30.09.2019 was received by the Appellant on 20.11.2019. In terms of Section 100(2) of the CGST Act, every appeal to this Authority should be filed within a period of 30 days from the date on which the Advance Ruling order is communicated to the aggrieved party. The proviso to Section 100(2) empowers this Authority to condone the delay in fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndowner approached the Appellant-Developer and offered the property for joint development given the Appellant's expertise in residential plotted developments. Accordingly, based on the representations made by the landowner, the Appellant has agreed to develop the project on the property. The JDA authorised the Appellant-Developer to develop the scheduled property into a residential layout. For this purpose, the Appellant as Developer was given the right to survey the property using its own resources, fence the property and install a security mechanism to secure the property, level the land, lay roads, drains, pathways, etc which are required for the commencement of the development. The Appellant incurs the expenditure for the development of the property. The Appellant prepares the necessary plans/drawings/designs for the residential layout with the help of architects and other professionals. The plans drawn up by the Appellant-Developer will be submitted by the landowner to the Government Authorities for obtaining the necessary sanctions / permissions. The Appellant-developer shall develop the project according to the sanctioned plan. The Appellant engages engineers, contractor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovision of infrastructure/amenities. There is an element of service rendered by the Appellant in the form of plotted development of the land which is the dominant activity of the agreement. 13. The Appellant has argued that the transaction in terms of the JDA is a composite supply where the principal supply being the sale of land is outside the purview of GST in terms of entry 5 of Schedule III of the Act. When we examine the provision of what constitutes a 'composite supply' as defined in Section 2(30) of the CGST Act, we find that composite supply means a supply made by a taxable person to a recipient * consisting of two or more taxable supplies of goods or services or both, or any combination thereof, * which are naturally bundled * and supplied in conjunction with each other * in the ordinary course of business, one of which is a principal supply. The definition of composite supply must be read with the definition of taxable supply and exempt supply. Sub-section (108) of section 2 defines a taxable supply as under: "taxable supply" means a supply of goods or services or both which is leviable to tax under this Act;" Sub-section (47) of section 2 defines an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssions, no-objections and such other orders as are required to procure the Sanctioned Plan. Further, in case the Appellant-Developer intends to modify the plans, the landowner shall obtain the required modifications to the sanctioned plan. The Appellant-Developer shall develop the project on the property subject to the obtaining of the sanctioned plan by the owners. Therefore, it is evident that the onus is on the landowner to comply with the provisions of Section 32 of the Karnataka Urban Development Authorities Act. It is the owner of the schedule property who agrees to transfer the ownership of the roads, drains, water supply mains, parks and open spaces, civic amenity areas to the Urban Development Authority. The Appellant-Developer has no role to play in obtaining the sanctions and in transfer of ownership. Therefore, this argument of the Appellant does not hold good. 15. The Appellant has also contended that there is no supply of any service by him to the landowners; that the JDA has been executed with a mutual agreement by both the parties to jointly develop the land and share the revenues out of the sale of land. In real estate transactions involving plotted development, o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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