Customs, Excise and Service Tax Appellate Tribunal

Premium Real Estate Developers and Ors. Vs. C.S.T.-Service Tax - Delhi

MANU/CE/0530/2018

27.11.2018

Service Tax

For levy of service tax, a specific amount has to be agreed between service recipient and service provider

The Appellant 'Premium Real Estate Developers', New Delhi is a partnership firm and is in the business of real estate trade. The issue involved in this appeal is whether the Appellant is 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) of Finance Act, 1994.

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.

A true consideration in a service contract is the consideration for the service rendered, which is irrespective of the fact whether the service provider earned profit or loss out of the transaction. In the present case, if the department's case is to be accepted, only in the event of Appellant making profit out of the transaction, it would be liable to pay service tax and no service tax will 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.

There is no consideration defined and/or provided for the alleged service. In absence of any defined consideration for the alleged service, there is no contract of service at all, and hence the transaction is not liable to service tax. Under the facts and circumstances, the Appellant entered into an agreement of trading in land, wherein they agreed to transfer, a measurement or area of land, in a particular area in favour of the Sahara India. Such land was to be arranged by them by way of procurement from the land owners. The Appellant was also obligated 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, the transaction is one of trading in land. In such transaction, the Appellant could either incur a loss or have a surplus (profit).

Memorandum of Understanding (MoU) between the Appellant and M/s. Sahara India Ltd. 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 the nature of a margin and share in the profit of the deal in purchase of land. For levy of service tax, a specific amount has to be agreed between the service recipient and the service provider. As no fixed amount has been agreed in the MoU which have been signed between the parties, the amount of the remuneration for service, if any is not clear in this case.

Since, the specific remuneration has not been fixed in the deal for acquisition of the land, present Tribunal is of the view that both the parties have worked more as a partner in the deal rather than as an agent and the principle, therefore taxable value itself has not acquired finality in this case.

Further, the issue relates to interpretation, and there is no mala fide on the part of the Appellant. The transaction is duly recorded in the books of accounts maintained by the Appellant. Further, there is no suppression of information from the revenue. Accordingly, the extended period of limitation is not applicable. Appeals allowed.

Tags : Transaction Tax Levy

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