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TMI Blog2020 (9) TMI 1145X X X X Extracts X X X X X X X X Extracts X X X X ..... the term land by ascribing any meaning to it or defining it by borrowing definitions from other laws. The CGST law does not make a reference to any other law while mentioning land in Schedule III. Also, if it had wanted to widen the scope of land to include benefits arising out of land it could have very well done so. Schedule III to the CGST Act, 2017 is so to speak an exemption notification and exemption notifications have to be strictly interpreted - The term land has to be interpreted strictly and cannot be extended to cover benefits arising out of land . W hether supply of TDR is supply of service or supply of Goods ? - HELD THAT:- The transferable development right that is TDR is an immovable property and hence not covered under the definition of goods. But the transfer of development right which is an immovable property is covered under the definition of service as the definition of service is very wide and it covers anything other than goods under its ambit. Hence as per the definition of supply under Section 7 of the CGST Act, 2017, the transfer of TDR made for consideration in the course or furtherance of business is supply of service and taxable as per t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S.S. Gupta, Chartered Accountant (Proceedings under Section 101 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017) At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provisions under the MGST Act. 2. The present appeal has been filed under Section 100 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [ hereinafter referred to as the CGST Act and MGST Act ] by M/s. Vilas Chandanmal Gandhi, Sigma one, Near MIT College, Kothrud, Pune-411038 (herein after referred to as the Appellant ) against the Advance Ruling No. GST-ARA-40/2019-201B-06, dated 15.01.2020 = 2020 (2) TMI 554 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA , passed by the Maharashtra Authority for Advance Ruling (MAAR). BRIEF FACTS OF THE CASE 3.1 The Appellant, M/s. Vilas Chandanmal Gandhi, holding GST Registration No. 27AAVPG7805Q1ZS, is an owner of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ratio of 73:27; The proportionate TDR/ FSI would be transferred by the Appellant in favour of the Developer or the Appellant would transfer the proportionate sale proceeds (out of the sale of TDR/ Additional FSI) to the Developer. 3.7 Accordingly, the Appellant surrendered the rights in the said land in favor of the Pune Municipal Corporation. In consideration of the same, the PMC awarded TDR s/ FSI to the Appellant. 3.8 Both the parties later decided to sell a part of the TDRs/ FSI to Vamona Developers Pvt. Ltd. (VDPL) and share the sale proceeds in the agreed ratio. Consequently, the Appellant entered into agreement/ deed of assignment with Vamona Developers Pvt. Ltd. 3.9 In order to obtain clarity on the leviabilty of GST on the transaction of sale of TDR, the Appellant filed the Advance Ruling application dated 21.08.2019 under section 97 of the CGST Act,2017 (herein after referred to as the application ) before the Maharashtra Authority for Advance Ruling ( herein after referred to as the Ruling Authority or MAAR ). The Appellant applied for advance ruling on the following questions: a) Whether GST is leviable on sale of Transferable Develop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation No. 12/2017-C.T. (Rate) dated 28.06.2017 in as much as service by way of transfer of development rights/additional FSI were made exempt subject to the certain conditions contained therein. (f) They also referred to the Notification No. 5/2019 -C.T. (Rate) dated 29.03.2019 amending Notification No. 13/2017 -C.T. (Rate) dated 28.06.2017, whereby service by way of transfer of development rights/Additional FSI by any person to the promoter was made taxable under reverse charge. They also referred to the Notification No. 6/2019-C.T. (Rate) dated 29.03.2019, which provides that the in case, the promoter who receives the development rights against the consideration in the form of construction service or against the monetary consideration, GST liability shall arise on the date of issuance of completion certificate. 3.11 The MAAR, vide their Advance Ruling Order No. GST-ARA-40/2019/13-06 dated 15.01.2020 = 2020 (2) TMI 554 - AUTHORITY FOR ADVANCE RULING, MAHARASHTRA , held that GST is leviable on the sale of TDR/ FSI. They, further, held that the said transaction would fall under the Heading 9972, i.e. at SI. No.16, entry (iii) of Notification No. 11/2017-C.T. (Rate) date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arlance meaning, and therefore cannot include transaction of sale of immovable property. 4.5 It has been further contended by the Appellant that purpose and object of GST is not to levy tax on transaction of immovable property as the same has been introduced by subsuming erstwhile Service Tax, Central Excise and VAT. 4.6 It has been further contended by the Appellant that the transaction of the sale of TDR/FSI would not get covered under the Heading 9972 of the Notification No. 11/2017 -C.T. (Rate) dated 28.06.2017, as the same was not in the nature of Real Estate Services . 4.7 They have further alleged that Advance Ruling Authority had based its judgment merely on the FAQs issued by the Government, which does not have legal force. RESPONDENT S / DEPARTMENT S SUBMISSION 5. The submissions made by the Department/Respondent is reproduced as under: 5.1 After going through the Advance Ruling order, the submission made by the Appellant and the facts of the case, in this Appeal, it is seen that, the Appellant has transferred the land to Pune Municipal Corporation (PMC) and in consideration of the same, the PMC awarded TDR s/ FSI, as consideration instead of consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is covered under SI. No. 16, item (iii) of Notification No. 11/2017 - Central Tax (Rate) dated 28.06.2017 (heading 9972). Therefore, the GST on TDR/FSI is payable at the rate of 18% (9% CGST+ 9% SGST). 5.5 The Appellant has referred definitions of Land and Immovable property under various Acts, and with the help of these definitions, the Appellant have submitted that, immovable property includes land and land includes the benefits arising out of land. They have further submitted that; developmental rights can be classified as land or benefits to arise out of land. They have placed reliance on the judgments of Hon. Bombay High Court in the cases of Chheda Housing Development Vs. Bibijan Shaikh Farid Ors 2007 (3) Mah.L.J.P. 402 = 2007 (2) TMI 664 - BOMBAY HIGH COURT and M/s. Sadoday Builders Private Limited Vs. Joint Charity Commissioner 2011 (6) Born CR 42 = 2011 (6) TMI 936 - BOMBAY HIGH COURT wherein the Hon ble High Court inter alia observed 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 .. 5.6 It is to mention here that, the Appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. PERSONAL HEARING 6. A personal hearing in the matter was held on 17.08 2020 which was attended by Shri S.S. Gupta, C.A. and Shri Vinod Awtani, C.A., as representatives of the Appellant, and by Shri N V Sorate, Dy. Commissioner, State Tax and Shri S C Gaikwad, State Tax Officer, in the capacity of the Jurisdictional Officers / Respondent in the subject appeal matter. 6.1 During the course of the said personal hearing, Shri S.S.Gupta, the representative of the Appellant, submitted a written brief, dated 11.08 2020, and a compilation of the tax provisions/tax laws and reiterated the submissions made therein. He submitted that sale of TDR/Additional FSI, is not liable to GST. In support of this, he made the following additional submissions apart from the earlier submissions, which were made during the time of filing of the instant appeal.: (a) that the transfer of TDR cannot be covered under the definition of service, as such definition has to read in the context of the GST Act. The Appellant further contended that the scope of the term anything in the definition of service needs to be understood in the context of the GST scheme and cannot cover all transactions; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fication No. 4/2018-C.T. (Rate) dated 25.01.2018 read with the Notification No. 13/2017-C.T. (Rate) dated 28.06.2017 as amended by the Notification No. 05/2019-C.T. (Rate) dated 29.03.2019. All these above-mentioned Notifications are related to the supply of service by transfer of the TDR/FSI. 8. The first issue raised by the Appellant is that the Advance Ruling order is not maintainable because Advance Ruling can be given only on a transaction proposed to be undertaken and not which has already been undertaken. It is surprising that the Appellant has taken this stand as it is the Appellant himself who had approached the Advance Ruling Authority for Advance Ruling on a transaction which has already been undertaken by them. There is a legal principle - Quod Approbo Non Reprobo which means that one thing which is approved will not be rejected at the same time. One cannot both approbate and reprobate i.e one cannot accept and reject at the same time. The Appellant cannot both accept the purview or scope of Advance Ruling (as evident from its willingness to raise the question in the first place) and then reject it. The Appellant has himself approached the authority for Advance Ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty Thus, the High Court while interpreting the meaning of the term TDR has resorted to the definition of immoveable property under the General Clauses Act, 1897 and has concluded that as TDR is a benefit arising out of land, it is immoveable property . However, the issue before us is the interpretation of the term land and whether TDR being classified under land comes under the scope of the clause (5) of Schedule 111 to the CGST Act, 2017. This issue has not been decided by the judgements quoted by the Appellant, simply because the issue was not before the Court and the High Court had no instance or opportunity to decide whether TDR comes under the definition of land. They have held that TDR is immoveable property which does not help the case of the Appellant as the whole argument is whether TDR being a benefit arising out of land comes under the scope of Clause 5 of Schedule III to the CGST Act, 2017,or not. 11. The question for decision before us is Whether TDR in itself is land and Building or Immovable property other than Land Building ? This issue has been decided by Hon ble ITAT in case of Income-tax Officer v. Shri Prem Ratt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the reliance placed by the Ld. D.R. on the decision of the Hon ble jurisdictional High Court in case of Chheda Housing Development Vs. Bibijan Shaikh Farid Ors 2007 (3) Mah.L.J.P. 402 = 2007 (2) TMI 664 - BOMBAY HIGH COURT is not helpful to the revenue. Para 6 The DVO should only consider net of land transfer to Developer by the assessee after considering acquisition made by the Govt as well as Thane Municipal Corporation as discussed hereinabove and also to exclude the value of TDR or additional FSI included in the consideration shown in the Development Agreement. In the judgment referred above it is held in clear words that Transferable Development Right is not land, but A right arising out of land and hence it is an immovable property. Thus on the basis of above judgments the contention of the Appellant that the Development rights in the land can be construed as land only and therefore, any transaction pertaining to the sale of the TDR would be sale of land only and will be no supply transaction being covered under Clause 5 of Schedule III of CGST Act, is not acceptable. 12. The Appellant has referred to various definitions of the term land occurring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply; (102) services means anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged; Further Clause 5 in Schedule III to CGST Act,2017 says that - Schedule III- [see section7]- Activities or transactions which shall be treated neither as a supply of goods nor a supply of services Clause 5: Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building 14. After going through the above definitions under the CGST Act, 2017, it is seen that, transferable development right that is TDR is an immovable property and hence not covered under the definition of goods. But the transfer of development right which is an immovable property is covered under the definition of service as the definition of service is very wide and it covers anything ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that TDR is a service. It is like any other commercial transaction amenable to tax. Also as mentioned earlier only sale of land is outside the purview of tax and it is clear that TDR is not land and therefore interpreting TDR as a service and therefore taxable, does not seem to us an absurd conclusion in the sense that it leads to the taxation of something either expressly prohibited by law or prohibited by the use of common logic or reason. 17. The Appellant has further argued that TDR was not taxable under the Finance Act, 1994 and was also not amenable to tax under the VAT Act and by referring to the Statement of Objects and Reasons (SOR) has sought to prove that the intention of GST law was to bring together all existing taxes and not to tax anything newly. Therefore. what was not taxable under the earlier laws cannot be taxed under the GST law. We are afraid we cannot agree with the argument of the Appellant. Firstly, whether TDR was taxable under the earlier laws or not cannot be an issue for discussion before us and therefore we cannot examine the Circular/Education Guide before us for its relevance. Assuming for the sake of argument that it was not taxable under the ear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses. The Government presupposes a liability to pay tax before the time of supply arises. 20. In continuation, the Central Government further issued Notification No. 4/2019 -C.T. (Rate), dated 29.03.2019, which amends the Notification No. 12/2017-C.T. (Rate), dated 28.06.2017 in as much as service by way of transfer of development rights/additional FSI were made exempt subject to the certain conditions contained therein. The Notification No. 5/2019 -C.T. (Rate), dated 29.03.2019 has been issued amending Notification No. 13/2017 -C.T. (Rate), dated 28.06.2017, whereby service by way of transfer of development rights/Additional FSI by any person to the promoter were made taxable under reverse charge. Notification No. 6/2019-C.T. (Rate), dated 29.03.2019, which provides that in case, promoter who receives development rights against the consideration in the form of construction service or against the monetary consideration, GST liability shall arise on the date of issuance of completion certificate. All these aforesaid notifications reveal the intention of legislature to tax all the transactions of TDR/Additional FSI under GST. 21. As regards the Appellant s contention that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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