2018 (4) TMI 461 – BOMBAY HIGH COURT – 2018 (12) G. S. T. L. 232 (Bom.) , [2018] 2 GSTL 129 (Bom) – Levy of GST on the one-time lease premium – letting plots of land on lease basis – long term lease – The members of the association were allotted plots. Under the scheme, the tenderer/bidder is required to make an offer by quoting a rate per square meter on account of payment of lease premium. The plots are to be allotted on long term lease of 60 years. – It is argued that, a long term lease of 60 years tantamounts to sale of the immovable property, since the lessor is deprived of, by the allotment the right to use, enjoy and possess the property. Our attention is invited to section 105 of the Transfer of Property Act, 1882.
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Held that:- if one refers to Schedule II, section 7, then, Item No. 2 styled as land and building and any lease, tenancy, licence to occupy land is a supply of service. Any lease or letting out of a building, including commercial, industrial or residential co
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d in favor of revenue. – WRIT PETITION NO. 12194 OF 2017 Dated:- 28-3-2018 – S. C. DHARMADHIKARI & PRAKASH. D. NAIK, JJ. Mr. Vikram Nankani-Senior Advocate with Mr. Chirag Mody, Mr. Aman Kacheria i/b. M/s. DSK Legal for the petitioners. Mr. Pradeep S. Jetly with Mr. Jitendra B. Mishra for respondent nos. 1 to 3. Mr. B. B. Sharma for respondent no. 4. Mr. B. V. Samant-AGP for State. ORAL JUDGMENT:- (Per S. C. Dharmadhikari, J.) 1. Rule. Respondents waive service. By consent, Rule is made returnable forthwith. 2. By this writ petition under Article 226 of the Constitution of India, the petitioners are challenging an order levying/collecting the Goods and Service Tax (GST) on the one-time lease premium charged by respondent no. 4 while letting plots of land on lease basis. By prayer clause (b), the petitioners seek a writ of mandamus or any other appropriate writ, order or direction in the nature thereof directing the respondents not to collect the Central Goods and Service Tax on th
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pers of Navi Mumbai and areas surrounding it. They have contributed to the growth and development of Navi Mumbai by constructing and developing several residential and commercial properties. These projects are undertaken and carried out after the fourth respondent, which is registered as a company under the Companies Act, 1956, exercises the statutory functions in terms of section 113(3A) of the Maharashtra Regional and Town Planning Act, 1966 (hereinafter referred to as the MRTP Act ). Insofar as the nature of the activities and functions of the fourth respondent, the petitioners, in para 6 of this petition, state as under:- 6. Respondent No. 4 was incorporated on 17th March, 1970 with the specific aim for creating a new planned, self-sufficient and sustainable city on the main land across Thane Creek adjoining the Mumbai City and it disposes of the land for development for 60 years to various builders and developers under the Navi Mumbai Land Disposal (Amendment) Regulation, 2008 by
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t in its ordinary and normal course of business, the fourth respondent invites offers from various entities to acquire, on lease, residential-cum-commercial plots and three/four star hotel plots in Panvel and Navi Mumbai from time to time. One such invitation was issued in April, 2017 inviting offers for various plots at Navi Mumbai and Panvel. The members of petitioner no. 1 applied for allotment of various plots. The members were allotted these plots. Under the scheme, the tenderer/bidder is required to make an offer by quoting a rate per square meter on account of payment of lease premium. The plots are to be allotted on long term lease of 60 years. A base price is already fixed for the plot in the annexure to the tender for the payment of one-time lease premium amount and the tenderer is required to quote a price above the base price per square meter of the plot which the tenderer is interested in acquiring. After the offers are scrutinised, respondent no. 4 usually allots plots on
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here was correspondence initiated and finally, when the authorities did not respond, the present petition has been filed. 7. The argument of Mr. Nankani learned senior counsel is that such a tax, as is demanded, cannot be levied, assessed and recovered. A long term lease of 60 years tantamounts to sale of the immovable property, since the lessor is deprived of, by the allotment the right to use, enjoy and possess the property. Our attention is invited to section 105 of the Transfer of Property Act, 1882. The one-time premium amount is the lumpsum consideration paid for entering into the lease. Our attention is also invited to the fact that the lease of 60 years and with a statutory authority is based on the position and status of that authority. In that regard, our attention is invited to section 113 and particularly sub-section (3A) of the MRTP Act. A new town is set up by the fourth respondent. It is a planning authority. It is a creature of the statute. Our attention is also invited
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ted, as there was a clear intent to leave out a transaction tantamounting to a sale. Mr. Nankani attempted to point out that one-time lease premium is different and distinct from lease rent. It is not a periodical payment, but a one time. It is not, therefore, conceivable that on such a premium, the tax could be levied, assessed and recovered. The premium is akin to Salami and our attention is invited to its plain dictionary meaning as set out in the legal dictionary. Our attention is also invited to a judgment of the Hon'ble Supreme Court in the case of Commissioner of Income Tax Assam, Tripura and Manipur vs. Panbari Tea Co. Ltd. AIR 1965 SC 1871. Then, our attention is invited to a judgment of the Hon'ble Supreme Court in the case of R. K. Palshikar (HUF) vs. Commissioner of Income Tax, M. P., Nagpur (1988) 3 SCC 594. Finally, Mr. Nankani would heavily rely upon an order passed by this court on 23rd August, 2017 in the case of Commissioner of Central Excise, Nashik vs. Mahar
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which seeks to pre-empt the levy assessment and recovery of GST. In any event, if the GST being now paid, then, the issue raised is purely academic. Apart therefrom, the law does not make any distinction between governmental and non-governmental agencies and supply of goods or services attracts GST. The CIDCO cannot be treated as Government. Its position as a new town planning authority is of no consequence. Once the legal provisions are clear, unambiguous and plain, then, regardless of the consequences, the tax is leviable. The whole edifice of Mr. Nankani's argument is based on the judgments delivered not in the context of the GST Act. The affidavit in reply at page 198 of the paper book and particularly paragraph no. 8 points out that the transaction is of supply of services. Once the Income Tax Act deals with a tax on income, then, the tests are different. The concepts are also different. It is, therefore, risky to read into one law the definition or provision to similar effect
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he Central Government or State Government or any local authority in which they are engaged as public authorities. The other definition, which is material and relevant is to be found in section 2(31) is of the word consideration . Section 2(31) reads as under:- 2(31) Consideration in relation to the supply of goods or services or both includes- (a) any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government; (b) the monetary value of any act or forbearance, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government: Provided that a deposit given in respect of the supply of goods or
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rvices as referred to in Schedule II. (2) Notwithstanding anything contained in sub-section (1),- (a) activities or transactions specified in Schedule III; or (b) such activities or transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities, as may be notified by the Government on the recommendations of the Council, shall be treated neither as a supply of goods nor a supply of services. (3) Subject to the provisions of sub-sections (1) and (2), the Government may, on the recommendations of the Council, specify, by notification, the transactions that are to be treated as- (a) a supply of goods and not as a supply of services; or (b) a supply of services and not as a supply of goods. 12. A perusal of sections 7, 8, 9, 10 and 11 falling in this Chapter leaves us in no manner of doubt that the expression supply includes all forms of supply of goods or services or both such as sale, transfer, barter, exchange,
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a notification issued under the MRTP Act. It may be designated as a New Town Development Authority for the purpose of the MRTP Act. For designation of a site as a new town and for development of any area as a site for the new town, sub-section (3A) of section 113 enables the State Government to require the work of developing and disposing of land in the area of new town by any such Corporation, company or subsidiary company as referred in sub-section (2) of section 113 thereof. It could be declared, by a notification in a Official Gazette, to be the New Town Development Authority for that area. Pertinently, this notification, which is relied upon and which notifies the Navi Mumbai Disposal of Land (Amendment) Regulations, 2008 reinforces the position that by a final notification in Official Gazette, the CIDCO is constituted and designated as the New Town Development Authority. 14. On a plain reading of the GST Act, we do not see how we can agree with Mr. Nankani. Mr. Nankani also relie
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n, Item No. 2 styled as land and building and any lease, tenancy, licence to occupy land is a supply of service. Any lease or letting out of a building, including commercial, industrial or residential complex for business, either wholly or partly is a supply of service. It is settled law that such provisions in a taxing statute would have to be read together and harmoniously in order to understand the nature of the levy, the object and purpose of its imposition. No activity of the nature mentioned in the inclusive provision can thus be left out of the net of the tax. Once this law, in terms of the substantive provisions and the Schedule, treats the activity as supply of goods or supply of services, particularly in relation to land and building and includes a lease, then, the consideration therefor as a premium/one-time premium is a measure on which the tax is levied, assessed and recovered. We cannot then probe into the legislation any further. 15. The reliance placed on the judgment o
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wered by holding that this receipt is a capital receipt. The question that arose before the Hon'ble Supreme Court was whether this finding is correct. It is in that context and how to treat this income, whether as a revenue receipt or a capital receipt that all the further observations are made. Even by terming the gain or income as Salami, what the Hon'ble Supreme Court was essentially concerned with is not the transaction or the nature thereof, but the income generated or derived from it. Its treatment, therefore, led to the Hon'ble Supreme Court referring to section 105 of the Transfer of Property Act, 1882. In these circumstances, the opinion rendered is that the income was treated rightly as a capital receipt. In the context, a lease of immovable property is a transfer of right to enjoy the property as termed by the Transfer of Property Act, 1882 for a price paid. That is how it being a transfer that the income derived in relation to lease of immovable property was tre
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rvations are in the context of the provisions, and the interpretation to be placed thereon, but found in the Income Tax Act, 1961. That is an assessment of the tax on income. We are concerned here with the GST Act and the tax on supply of goods and services. It is not disputed that the position of the CIDCO for the purpose of orderly planning and development will be of no assistance in the sense while developing a new township, the objective of the planning authority is not to earn money, but to develop the area so that the purpose of setting up a township is achieved by more people wanting to live in the area in lieu of the various amenities provided in the area. The CIDCO is one such authority. It is entirely for the legislature, therefore, to exercise the powers conferred by sub-section (2) of section 7 of the GST Act and issue the requisite notification. Absent that notification, merely going by the status of the CIDCO, we cannot hold that the lease premium would not attract or inv
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therefore, enabled the Hon'ble Supreme Court to hold that the constitutional entries would not allow the power of competent legislature to make the law. This judgment is of no assistance. 18. In the case of Commissioner of Central Excise, Nashik (supra), the demand of service tax was in issue. The Finance Act, 1994 and particularly section 65 clause (64) was relied upon to urge that the service charges collected by the MIDC from the allottees of the plots are in relation to services provided by the MIDC to the plot holders and the same is covered by the category maintenance, management and repairs under clause (64) of section 65 of the Act. It is in relation to such a controversy that the Hon'ble Supreme Court's judgment in the case of Shri Ramtanu Co-operative Housing Society Ltd. (supra) outlining the legal position and the status of the Corporation is referred by the Division Bench. The issue raised related to collection of service charges, but whether the services rend
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ras 23 and 24 are extremely relevant. These paragraphs read as under:- 23. In the modem sense the distinction between sovereign or non-sovereign power thus does not exist. It all depends on the nature of power and manner of its exercise. Legislative supremacy under the Constitution arises out of constitutional provisions. The legislature is free to legislate on topics and subjects carved out for it. Similarly, the executive is free to implement and administer the law. A law made by a legislature may be bad or may be ultra vires, but since it is an exercise of legislative power, a person affected by it may challenge its validity but he cannot approach a court of law for negligence in making the law. Nor can the Government in exercise of its executive action be sued for its decision on political or policy matters. It is in public interest that for acts performed by the State either in its legislative or executive capacity it should not be answerable in torts. That would be illogical and
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e society. No legal or political system today can place the State above law as it is unjust and unfair for a citizen to be deprived of his property illegally by negligent act of officers of the State without any remedy. From sincerity, efficiency and dignity of State as a juristic person, propounded in nineteenth century as sound sociological basis for State immunity the circle has gone round and the emphasis now is more on liberty, equality and the rule of law. The modern social thinking of progressive societies and the judicial approach is to do away with archaic State protection and place the State or the Government on a par with any other juristic legal entity. Any watertight compartmentalization of the functions of the State as "sovereign and non-sovereign" or "governmental and non-governmental" is not sound. It is contrary to modem jurisprudential thinking. The need of the State to have extraordinary powers cannot be doubted. But with the conceptual change of
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rder but it extends to regulating and controlling the activities of people in almost every sphere, educational, commercial, social, economic, political and even marital. The demarcating line between sovereign and non-sovereign powers for which no rational basis survives has largely disappeared. Therefore, barring functions such as administration of justice, maintenance of law and order and repression of crime etc. which are among the primary and inalienable functions of a constitutional Government, the State cannot claim any immunity. The determination of vicarious liability of the State being linked with negligence of its officers, if they can be sued personally for which there is no dearth of authority and the law of misfeasance in discharge of public duty having marched ahead, there is no rationale for the proposition that even if the officer is liable the State cannot be sued. The liability of the officer personally was not doubted even in Viscount Canterbury (supra). But the Crown
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