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TMI Blog2024 (2) TMI 902X X X X Extracts X X X X X X X X Extracts X X X X ..... e JDA, the petitioner would have the permission/license to enter into the subject property of the landowners for the purpose of undertaking and execution of the development activities on the said property. In terms of the JDA, upon the petitioner developing the entire property, the landowners would be granting a share in the land proportionate to the built-up area for which the petitioner is entitled towards consideration for the development. It is evident that the petitioner is offering construction services to the landowners in exchange for the landowners transferring the development rights to the petitioner. Only on account of the development rights thus the petitioner gets the right to enter into the land to undertake construction over the said property. The transfer of ownership from the landowner goes directly to the purchaser of the constructed property and not in favour of the petitioner unless and until the land stands transferred in the name of the petitioner. The same cannot be brought within the ambit of sale - Transferring of the development rights does not result in transfer of ownership rights. The reliance of the circular dated 10.02.2012 i.e. Circular No. 151/2/201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring for the respondent-Department. ORDER (PER HON BLE SRI JUSTICE P.SAM KOSHY) The instant writ petition has been filed by the petitioner which is a company engaged in the business of construction activities. The relief sought for in the instant writ petition is for a direction by way of a writ of Mandamus declaring that the transfer of development rights of land by the land owners to the petitioner by way of a Joint Development Agreement (for short JDA ) should be treated as sale of land by the land owners and hence the execution of the said agreement should not be subjected to levy of GST. That it should be covered under Entry 5 of Schedule III of Goods and Services Tax Act, 2017 (for short GST Act, 2017 ) and the Telangana Goods and Services Tax Act, 2017 (for short TGST Act, 2017 ). The incidental relief also sought for is issuance of a writ of Mandamus declaring the Notification No. 4 of 2018-Central Tax (Rate) (Annexure P1) dated 30.09.2019 imposing GST on transfer of development rights of land by the land owners under a JDA be ultra vires the Constitution of India. 2. Heard Sri S. Ravi, learned Senior Counsel for the petitioner and Sri Dominic Fernandes, learned Senior Stan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned Senior Counsel for the petitioner, the transaction entered into between the petitioner and the land owner can be safely brought within the purview of sale of land and pursuant to the JDA, the original land owner in fact transferred the development rights of the subject property to the petitioner. Thereby, the said transfer of development rights amounts to sale and the rights on the said property getting transferred upon the petitioner, the same should be exempted from the levy of GST. 6. In the given factual backdrop, the issues which need to be deliberated upon and decided in the present writ petition are: a) Whether the transfer of development rights is in the nature of transfer of immovable property or the nature of services would fall within the scope of GST? b) Whether the transfer of development rights can be safely brought within the purview of an outright sale of land? 7. Learned Senior Counsel for the petitioner agitated that the said impugned notification is ultra vires of Article 14, 246A and 265 of the Constitution of India. Particularly, for the reason that the said notification does not prescribe any methodology or offer of development rights. Thus, it becomes ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... corners of the statute which in the instant case is silent. Hence, according to the learned Senior Counsel, the respondents have travelled beyond the four corners of the GST law. Thus, have exceeded its jurisdiction with issuance of the said notification. 12. It was the contention of the learned Senior Counsel that taxing areas under the GST law cannot be expanded only by way of issuance of a notification. In addition, there is no specific mechanism or machinery which determines the quantum of tax liability upon the transfer of development rights and there is no specific provision under the GST law which determines the rate at which tax has to be levied on a JDA pertaining to transfer of development rights. 13. It was the further contention of the learned Senior Counsel for the petitioner that the impugned notification would amount of it being a delegated legislation and the delegated legislation cannot travel beyond the scope of substantive law. The learned Senior Counsel relied upon the judgments of the Hon ble Supreme Court in the case of Rajasthan State Industrial Development and Investment Corporation v. Subhash Sindhi Co-operative Housing Society, Jaipur and others (2013) 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epartment strongly contended that in order to reach to a conclusion whether the JDA would amount to an outright sale of land or it is only a transfer of development rights alone, it would be necessary to take into consideration certain clauses of JDA itself. 18. Some of the relevant clauses of the JDA necessary for understanding the issue involved in the instant case are reproduced herein under: A. Landowner I is the sole and absolute owner of the non-agricultural land admeasuring 8.3 0 (eight point three zero) acres forming part of Plot Nos. 9, 10A and 10B and comprised in Survey No. 83/1, all situated at Hyderabad Knowledge City, Raiduty Village, Serilingampally Mandal, R.R. District, Telangana State, the details of which are morefully described in Part A of the First Schedule hereinunder written and hereinafter referred to as Portion I . B. Landowner II is the sole and absolute owner of the non-agricultural land admeasuring 1.82 (one point eight two) acres forming part of Plot No. 8B2 and comprised in Survey No. 8III /1, situated at Hyderabad Knowledge City, Raiduty Village, Serilingampally Mandal, R.R. District, Telangana State, the details of which are morefully described in P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be construed as delivery of possession in part performance of any agreement to sell under Section 53-A of the Transfer of Property Act, 1882 and/or Section 2(47) of the Income Tax Act, 1961. 2.5. (a) The Developer shall be entitled to engage architects, engineers, contractors and other agencies, to mobilize work force (collective Vendors ) necessary, as the Developer deems fit for execution and achieving Project Completion. Under no circumstances shall it be construed that the Landowners have any privity of contact with such Vendors. In the event of disputes/claims by such Vendors from time to time, such disputes/claims shall not be the liability of the Landowners under any circumstances. 5.3. The Developer shall achieve Project Completion within 48 (forty-eight) months commencing from the Project Commencement (such 48 (forty eight) months being hereinafter referred to as Deadline Date ). The Parties further agree that, the Developer shall be entitled for a grace period of 6 (six) months commencing from the Deadline Date without the Developer being liable to the Landowners for any penalties or damages i.e. 54 (fifty four) months from the Project Commencement Date (such (fifty four) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to terminate this Agreement. Upon exercise of such right to terminate by the Landowners, this Agreement shall then stand terminated and each of the Parties shall stand released from all of their rights and obligations under this Agreement against the Landowners: (i) reimbursing the Developer in full all the actual costs, out in Annexure VIII upon the Developer providing the documentary proof towards such costs and expenses, and (ii) refund of the entire Security Deposit. Immediately upon such termination and upon payment of such costs and expenses and refund of Security Deposit, the Developer shall cease to be in permissive possession and the license to Developer in respect of the Schedule Property shall stand cancelled. 19. Referring to the aforesaid clauses of the JDA, learned Senior Standing Counsel for the respondent-Department strongly contended that upon reading of the clauses of the JDA, particularly the clauses which are reproduced in the preceding paragraphs, it gives a clear indication that there is no outright sale of property in the name of the developer. Rather, it is a case where the conditions would clearly indicate that the ownership, the title rights are all retai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the completed Tower and Annex Building in the Project which is attributable to the Developer Share as per the Allocation Agreement. The Parties have further agreed that upon Project Completion, the Developer shall be entitled to seek and receive in its favour and/or in favour of any of its nominee(s) (subject to the terms of this Agreement), a conveyance (in the form of sale) from the Landowners of the remaining proportionate Developer UDS. It is clarified that in the event Completion of all 3 (three) Towers in the Project is achieved contemporaneously, then the Developer shall be entitled to receive conveyance (in the form of sale) of the entire Developer UDS. For the purposes of receiving sale of the Developer UDS in accordance with this Clause 6.7, the Developer shall be entitled to execute all relevant deeds and documents including sale deeds, conveyance deed etc. on behalf of the Landowners and admit execution thereof for purposes of registration before the jurisdictional Sub-Registrar of Assurances by using the authorization provided by the Landowners in terms of Clause 17 herein. Further, at the request of the Developer, the Landowners shall furnish certificate from its stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itled towards consideration for the development. 26. As per the terms of the JDA, it also has a clause which deals with a situation of any default on the part of the petitioner in not timely completing the project or any other conditions stipulated or breach of any of the conditions referred to in the said JDA. There is also a condition of cancelling the contract agreement and under such situation; the entire rights over the said property would continue to remain with the landowners. This again would show that the right and title of the property even as on date stands vested with the landowners and not with the petitioner. 27. Clauses 6.1 and 6.7 of JDA further envisages that after the development, later on when the developer/petitioner hands over the completed units to the landowners, the landowners and the developer will then enter into a conveyance deed whereby the landowners will execute a sale deed to transfer the undivided share of land which would fall to the share of the petitioner towards the investment, efforts, cost of construction and expenses incurred by the petitioner in the course of developing that entire property. Thus, it is evident that the petitioner is offering ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... developer and/or its nominee(s), the developer UDS proportionate to such developer share for which completion has been achieved subject to terms of this agreement contemporaneous with the delivery of the landowners share by the developer. 30. The transfer of ownership from the landowner goes directly to the purchaser of the constructed property and not in favour of the petitioner unless and until the land stands transferred in the name of the petitioner. The same cannot be brought within the ambit of sale. Transferring of the development rights does not result in transfer of ownership rights. That the sale of land/transfer of land or undivided share of land would get executed only after issuance of completion certificate of the project. This itself would give a clear indication that the services rendered by the petitioner in execution of JDA was supplied prior to the issuance of completion certificate and would thus be amenable to GST. 31. The reliance of the circular dated 10.02.2012 i.e. Circular No. 151/2/2012-ST, may not be of any relevance for the dispute in the present writ petition as the same was issued under service tax regime under which service tax was levied only on tho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i.e. construction services further read with Entry 5(b) of Schedule II. Under no circumstances can the aforesaid two supplies can be termed as sale of land under Entry 5 of Schedule- III. 35. The Hon ble Supreme Court in the case of Commissioner of Income Tax v. Balbir Singh Maini (2018) 12 Supreme Court Cases 354 though dealing with the provisions of Income Tax Act, but under similar factual backdrop in paragraph Nos. 19, 25 and 26 had held as under: 19. A plain reading of the JDA shows that it is essentially an agreement to facilitate development of 21.2 acres so that the developers build at their own cost, after obtaining necessary approvals, flats of a given size, some of which were then to be handed over to the members of the Society. Payments were also to be made by the developer to each member in addition to giving each member a certain number of flats depending upon the size of the member s plot that was handed over. What is important to bear in mind is that payments under the third instalment were only to be made after the grant of approvals and not otherwise, and that it is an admitted position that this was never done because no approvals could be obtained as the High C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nLine SC 715 held as under: There cannot be any doubt whatsoever that a document has to read as a whole. The purport and object with which the parties thereto entered into a contract ought to be ascertained only from the terms and conditions thereof. Neither the nomenclature of the document nor any particular activity undertaken by the parties to the contract would be decisive. 38. As far as the various judgments cited by the learned Senior Counsel for the petitioner which are reflected in paragraph No. 14, if we look into the facts of each of those judgments, it will be evidently clear that all those judgments were rendered under an entirely different factual backdrop unconnected and unrelated to the issue involved in the present case. In view of the same, without dealing with each of those cases separately, we are of the considered opinion that those judgments and the principles laid down in those judgments cannot be made applicable in a straight jacket manner/formula to the facts of the present case. 39. On conjoint reading of the clauses under JDA, clause d of the JDA along with clause 2.2, 2.3, 2.4, 6.1, 6.7 and 23.4 (all of which stands reproduced in the preceding paragraphs ..... X X X X Extracts X X X X X X X X Extracts X X X X
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