Builder not liable to pay Service Tax on ‘One-Time’ Maintenance Charges collected from Flat Buyers: Bombay HC [Read Judgment]

Maintenance Charges - Flats - Taxscan

A two-judge bench of the Bombay High Court recently held that the builder is not liable to pay service tax on the ‘One-time’ maintenance charges collected from Flat Buyers.

The Tribunal held that the assessee was not providing Management, Maintenance or Repair Service by collecting amount from prospective flat buyers, for maintaining the building, in the guise of deposits which is not returnable.

Before the High Court, the counsel for the Revenue stated that the decision of the Tribunal in the case of Kumar Beheray Rathi (Supra) was appealed to this Court along with other Appeals raising identical issue and was decided on 25 January 2018 in favour of the Respondent–Assessee i.e. Kumar Beheray Rathi (Supra).

In that case, the Appellants were builders/developers of residential flats and various commercial premises and recovered one-time maintenance deposit from each of the customers to whom they sold the flats. The department contended to levy the tax on the said amount under the category “Maintenance or Repair Services” along with interest and penalty.

The High Court, while disposing of the case in January this year, had held that the builder or developer is not liable to pay service tax for collecting amount for up­keep of the apartment or premises when the same is provided under statutory service.

Following the above decision, the bench comprising Justice Riyaz I. Chagla and Justice M.S. Sanklecha dismissed the departmental appeal.

To Read the full text of the Judgment CLICK HERE