Amount Received towards Sale of Developmental Rights to Land is not Commission for Real Estates Agents Services: CESTAT [Read Order]

GST - Real Estates - Service Tax

While hearing the appeal of CCE, Raipur against M/s Banke Bihari Ispat Pvt. Ltd, Delhi bench of Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) held that amount received towards Sale of developmental rights to land is not the commission for real estates agent’s services.

The Assessee Company engaged in the manufacture of iron and steel bars, recorded the amount of sales consideration to the tune of 85.5 lakh. During the time of auditing, the department found that certain piece of land sold by some persons including the respondent and received 30 crores.

It has appeared that the sale consideration received for providing the service of real estate agent by Respondent are not offered for tax. Consequently, show cause proceedings were initiated. Accordingly, original authority confirmed the service tax demand along with interest and penalty under various sections of Finance Act, 1994.

Later on, appeal Commissioner (Appeals), set aside the demand and allowed the appeal. Now the Revenue has approached this tribunal challenging the dropping of the Service Tax demand.

The counsel for Revenue raised a contention that the role of respondent was developing the bare land in such a way that it can easily marketable, making the land suitable for plotting and by obtaining NOCs from the different departments. Such activities of the respondent come under the taxable category of real estate agent service and also pressed the definition under section 65(88) of the Finance Act, 1994.

On the counterpart Counsel for Respondent argued that he had entered into two agreement called development agreement and sales deed. Also, the counsel added that respondent has not acted as a real estate agent, and hence, is not liable for payment of any Service Tax.

The tribunal bench comprising of Judicial Member S.K. Mohanty and Technical Member V. Padmanabhan heard the contention and perused the cases cited by the respondent company. The tribunal found similar issue was considered by the Tribunal in the case of Commissioner, Central Excise (Nashik) vs. M/s Viraj Estate Pvt Ltd.

While perusing the case it was found that M/s Viraj Estates Pvt Ltd was also one of the signatories to both the Development Agreement as well as sales deed received a consideration to the tune of 1,10,00,000/-, whereas the respondent herein received an amount of Rs. 85,50,000/.

Thereafter tribunal held with no Service Tax is liable to be paid by them. While pressing the same tribunal held that consideration received by the respondent is towards the sale of Developmental Rights to the land and cannot be considered as the commission for real estate agents services.

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