Purchaser and Re-seller of Land cannot be Treated as Real Estate Agent: CESTAT sets aside Demand of Service Tax [Read Order]

The Ahmedabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the purchaser and re-seller of land cannot be treated as a real estate agent and set aside the demand of service tax.

Nilesh T Patel, the appellant is engaged in the purchase of the farmer’s land under an agreement by making part payment and subsequently the land is sold to M/s. Sahara India Commercial Corporation Limited.  The appellant is engaged in the business activity of purchase and resale of land which does not amount to the service of Real Estate Agent service. 

It was submitted by the appellant that there is no activity such as Real Estate Agent service in the present case as the appellant purchase land at ‘x’ price and the same is sold to M/s. Sahara India Commercial Corporation Limited at ‘x+1’ price.  The profit or loss is on the account of the appellant only.  Therefore it cannot be said the that appellant is acting as Real Estate Agent. 

In the case of M/s. Sahara India Commercial Corporation Limited, the Tribunal has viewed that under this arrangement the purchaser and re-seller of land cannot be treated as Real Estate Agents for charging service tax under the said category. 

From the perusal of the Memorandum of Understanding (MoU) between the appellant and M/s. Sahara India Ltd. It was very obvious that MoU is not only for providing purely service for the acquisition of the land but involves many other functions such as verification of the title deeds of the persons from whom the lands are to be acquired and obtaining necessary rights for the development of the land from the Competent Authority.

It was held that “since the specific remuneration has not been fixed in the deal for the acquisition of the land we are 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 we are of the view that taxable value itself has not acquired finality in this case.”

Following the said decision of the Tribunal, the two-member bench comprising Mr Ramesh Nair,(Judicial)and Mr C L Mahar, (Technical)held that the appellant’s activity does not fall under the category of Real Estate Agent Service, hence service tax demand under the said head cannot be sustained.  The CESTAT set aside the impugned order and allowed the appeal.

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