Joint-development rights’ non-taxable where land value included in villa’s price for buyers

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Consideration received from landowners in the form of development rights thereon for construction of ‘villas’ under Joint Development Agreement (JDA) not liable to service tax separately where cost of acquisition of land included in gross amount charged by assessee-builder; Observes that assessee discharged service tax on the transaction entered with prospective customers from whom it received consideration in cash for the sale of villas and “It would not be a rocket science to understand that the value….would include the consideration paid or payable for acquisition of land”; Rejecting Revenue’s contention that transactions between builder & landowner and builder & prospective buyers have to be understood as two separate transactions.

CESTAT remarks that, “merely because the consideration received from land owners is invested in construction of villas to other buyers on which service tax is paid, it cannot be concluded that service tax paid on consideration received from land owners has to be evaluated differently”; Referring to Chartered Accountant’s certificate evidencing discharge of service tax on gross consideration received, as well as CBEC Circular dated February 16, 2006, CESTAT holds that as assessee discharged service tax liability on the construction undertaken on joint development basis, “demand of service tax on the same amount again would amount to double taxation”

Moreover, finds demand to be hit by limitation absent any mala fide intention to evade tax inasmuch as assessee had declared the value received from prospective customers in the returns and discharged service tax thereon : Hyderabad CESTAT

The judgment was delivered by Shri M.V. Ravindran and Shri Madhu Mohan Damodhar

Mr. Alok Barthwal & Mr. Nageswara Rao appeared on behalf of the assessee, while Revenue was represented by Mr. J. Sreenivas

SC, in case of N. Bala Bhaskar [TS-524-SC-2016-ST], dismissed landowner’s SLP against service tax levy on ‘construction service’ under JDA. It refused to interfere with the order of Madras HC [TS-176-HC-2016(MAD)-ST] which had dismissed assessee’s challenge to CBEC Circular No. 151/2/2012-ST dated February 10, 2012 and Finance Ministry TRU Instruction dated on January 20, 2016

Citation: [TS-183-CESTAT-2018-ST]