Premium Real Estate Developers Vs C.S.T. Service Tax (CESTAT Delhi)
Conclusion: Service tax cannot be imposed under the category “Real Estate Service” in absence of any defined consideration for the alleged service as both the parties were buying and selling property on principal to principal basis rather than as an agent and the principle.
Held: In the present case, assessee-firm was in the business of real estate trade. It 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. Assessee-firm 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. Department demanded Service Tax from assessee under the head ‘Real Estate Agent Service’. It was noted there was no consideration defined and/or provided for the alleged service. In absence of any defined consideration for the alleged service, there was no contract of service at all, and hence the transaction was not liable to service tax. In fact Sahara India instead of paying the price directly to the land owner, paid lump sum amount to assessee and thereafter assessee 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 assessee transferred the land in favour of Sahara India. Thus the transaction was one of trading in land. Since the specific remuneration had not been fixed in the deal for acquisition of the land, therefore, both the parties had worked more as a partner in the deal rather than as an agent and the principle and taxable value itself has not acquired finality in this case. Therefore, demanding service tax on the entire amount paid to assessee for acquisition of land was not sustainable in law
FULL TEXT OF THE CESTAT JUDGEMENT
1. 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).
2. The appellant ‘Premium Real Estate Developers’, New Delhi is a partnership firm and is in the business of real estate trade. The main objective of the partnership firm is to carry on the business of purchase, sale, develop, take and exchange or otherwise, whether for investment or sale in any real estate including lands to carry on the business of builders, contractors, dealers in land, building and any other activity in connection therewith and incidental thereto.
3. Sahara India Commercial Corporation Ltd.(‘Sahara India’ for short) was interested in acquiring large parcels of land for setting up townships. Accordingly Sahara India entered into three separate but similar memorandum of understanding with the appellant firm for acquiring three large parcels of land at three different locations as follows;
