2019 (2) TMI 869 – CESTAT NEW DELHI – TMI – Classification of services – Renting of immovable property services or not – ‘Advance Development Cost’ received from Developers towards development of common infrastructure facilities – extended period of limitation – Held that:- Development of Common Infrastructure facilities outside Asset Area cannot be construed as ‘Renting of Immovable Property’ or a service in relation to the renting of immovable property. The treatment of reimbursement of cost, of common facilities, as ‘Renting Service’ by the Adjudicating Authority is not legal because such common facilities were developed by taking advances as a pool of fund, for the infrastructure to be used by common beneficiaries and the account was to be settled as per Agreement by returning excess, if any, or charging deficit, etc. if any, if the cost of the works exceeded or was less than the amount collected as advance.
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For rent on immovable property service, the expression ‘in relatio
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elopment cost, because common facilities developed belong to none (held in trust) and the benefit is derived by all the 13 developers, as well as the public. Hence the same is not liable to Service Tax – Advance development cost is not consideration for any services rendered, therefore, Section 67 has been improperly invoked to take gross value as consideration for alleged services provided, even when whole of the deposit is liable to be spent and nothing retained as per the IDSA agreement.
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It is settled law that service tax, if any, is not applicable on the Advance Development Cost received prior to 01.07.2010. In the instant case taxable event happened even prior to the date when licensing of vacant land was included in the renting of immovable services w.e.f 01.07.2010. Therefore, taxable event having occurred earlier to the point of levy of service tax, the same cannot be levied.
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The ‘Infrastructure development cost’ as per IDSA is not covered under renting of immovabl
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rport Authority of India (AAI) for Delhi Airport on 04.04.2006 and under the Agreement the appellant had exclusive rights to undertake some of the functions like operating, maintaining, developing, designing, constructing, upgrading IGI Airport and to perform services relating to aeronautics and non aeronautics. It was their responsibility to adhere to Master Plan norms of the competent local authority and the land area utilized of non transfer assets not to exceed 5%, and to allow any development as per the Civil Aviation Security norms as per Para 2.2.4 of the said agreement which reads as under:- 2.2.4 It is expressly understood by the Parties that the JVC shall provide Non-Aeronautical Services at the Airport as above, provided however that the land area utilized for provision of Non-Transfer Assets shall not exceed five percent (or such different percentage as set forth) in the master plan norms of the competent local authority of Delhi, (as the same may change from time to time)
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tal 13 parties, as detailed below:- Assets area Area in acres BUA sft Successful bidders Developers Total infra deposits Date of DA Date of IDSA 1 5.48 650,000 Juniper Hotels Juniper Hotels 71.50 2.6.2009 2.6.2009 2 4.69 625,000 AAPC Caddie Hotels 68.75 15.6.2009 15.6.2009 3 5.03 730,000 Blue Coast Silver Resorts 60.23 26.2.2010 26.2.2010 4 4.55 578,000 Aria Hotels Aria Hotels 63.58 4.7.2009 4.7.2009 5A 1.58 240,000 Pride Hotels Pride Hotels 26.40 24.2.2010 24.2.2010 5B 1.58 240,000 Sweta Estates Central Park Infra Dev 26.40 27.2.2010 27.2.2010 6 1.95 232,000 Lemon Tree Hyacinth Hotels 25.52 25.5.2009 25.5.2009 7 2.22 300,000 Bhati Realty Oak Infra Dev 33.00 25.2.2010 25.2.2010 8 2.3 325,000 Bhati Realty Oak Infra Dev 35.75 25.2.2010 25.2.2010 9 1.71 190,000 InterGlobe Hotels nterGlobe Hotels 20.90 3.6.2009 3.6.2009 10 1.6 175,000 Bird Group Bird Group 19.25 28.5.2009 28.5.2009 11 3.1 450,000 Bhati Realty Aspen Buildtech 20.35 29.5.2009 29.5.2009 12 1.6 185,000 Wave Impex Wave Hospital
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Cost for any reason whatsoever. 1.1.2 The Advance Development Cost shall be payable by the Developer to DIAL, in three tranches within one year from the date hereof. The Developer shall pay 50% of the Advance Development Cost to DIAL, concurrently with the execution of this Agreement ( First Tranche ) in the manner specified herein. 1.1.3 25% of the Advance Development Cost, shall be payable within 6 months from the date hereof. The remaining 25% of the Advance Development Cost shall be payable by the Developer to DIAL, on or before the first anniversary of the date hereof. 1.1.4 Subject to Article 6.4 hereof, the Parties agree that any portion of Advance Development Cost paid by the Developer to DIAL, as has not been utilized by DIAL towards development of any infrastructure Facilities during the course of the Initial Term, as certified by the internal auditors of DIAL, shall be returned to the Developer upon the earlier of the expiry of the Initial Term or upon termination of Develo
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cture Development and Services Agreement (IDSA) with each developer. All the agreements i.e. DA and IDSA with 13 parties were entered prior 1.07.2010, i.e. the date on which notification No.31/2010 – ST dt.01.07.2010 came into existence by virtue of which vacant land became subject of renting of immoveable property service . By virtue of these agreements the vacant lands (in asset area 3) within Hospitality District were leased/ licensed to Developers under Development Agreement. Certain common areas outside the Asset Area 3, were to be developed and provided with infrastructure facilities and were to be maintained by the appellant under IDSA Agreement . In relation to these infrastructure development facilities, the IDSA agreement provided that DIAL shall be responsible to provide in Asset Area-3, following common infrastructure facilities, upon receipt of advance towards development cost, from the Developer, and payment of maintenance charges: (i) power supply at 11KW to Developer in
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advance development cost to DIAL with a condition to terminate agreement, in case of facilities not been provided and DIAL was required to compensate. All maintenance charges later on separately collected (post development) were however subjected to payment of tax, which was duly deposited and the same is not in dispute. 5. Appellant was claiming exemption under Notification No.31/2010-ST dated 22.06.2010. However, the Department was of the view that after amendment in Airport service w.e.f. 01.07.2010 the classification of the land development cost was under Renting of Immovable Property Services This, as per the department, was clarified to the appellant on 02/03.05.2012 vide C.No.IV(16)HQ/Tech/ST/179/2011, in response to clarification sought by M/s Aria Hotels & Consultancy Services Pvt. Ltd., which was one of the parties to such agreements with the appellant. Even though the letter itself mentioned that the issue is being referred to the Board for confirmation of views, but st
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Tax Implications; A. Whether grant of right to develop, operate and maintain non-transferable assets with grant of license in respect of Land can be treated as taxable service under service tax regulations? Under the proposed arrangement, DAPL, will give license of Land to the licensee with the right to use the said land for specific purpose of developing, operating and maintaining facilities over the Land. As a consideration for the license of land development right, licensee would pay an annual license fee to DAPL. As the transaction is in the nature of license of land acquisition of development right, there is exposure of service tax or VAT to such transaction as explained below:- Service Tax; As per service tax law there is no service tax on the right to use of land. Further, in the Budget 2007 a new taxable category of renting of immovable property has been inserted which excludes vacant land from its ambit. Therefore the activity of licensing of land by DAPL, to licensee would no
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nt transaction; 1. Renting of Immovable Property Services; As per the definition of immovable property service under the service tax law (refer annexure 2 for the definition), this category covers the services of renting, leasing, letting of an immovable property for the furtherance of business or commerce. Further, immovable property has been defined to cover buildings and land appurtenant to these buildings. In the instant case the common facilities being used are understood to be that of road, power, water etc which are not in the nature of building/ part of building. Accordingly, since the facilities being provided do not fall under the definition of immovable property, no service tax implication would arise under this category. Further, these services cover renting, leasing, letting out of immovable property. Renting, leasing, letting out of facilities is an arrangement wherein an exclusive right is granted for the immovable property, whereas in this case the various sub-licensees
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chargeable to service tax under the category of business support services. 3. Airport Services; Airport services as defined under the Finance Act, 1994 (refer annexure2 for definition) are any services provided by the airport authority or any other person authorized by it, in an airport or civil enclave. In the instant case DAPL has been given the right to manage the property which flows from the right given by AAI to DIAL and then by DIAL to DAPL. Further as per the definition these should be services provided in the airport. For this purpose it is required to be examined whether the common facilities are located inside the airport. The airport has not been directly defined under the service tax provisions. It is taken to have the sme meaning as is assigned to it by the Airport Authority Act, 1994, which while defining the term airport uses the terms aerodrome and aircraft as defined in Aircraft Act, 1934. Following are the relevant definitions:- Airport has the meaning assigned to it
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rture of aircraft and includes all buildings, sheds, vessels, piers and other structures thereon or appertaining thereto. As we have been made to understand that the area on which the common facilities would be constructed falls beyond the boundary of the airport area used for landing and taking off of aircraft, a view may be taken that such area would not be appertaining to the area intended to be used for landing or departure of aircraft covered under the definition of airport as discussed above. Accordingly, the applicability of the category of airport service to the instant transaction can be ruled out. Based on the above discussion, it may be seen that the advance received by DAPL from the licensees for development of common facilities by DAPL, does not sell under any of the taxable service category, therefore, there is no service tax exposure on the instant transaction. C. Whether refundable deposits received by DAPL from the licensees for overall development of infrastructure fa
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rs to have been made by M/s CAS Associates on 13/12/2011. Another representation was made by the appellant on 17.01.2012 on the same issue, however the Assistant Commissioner in response, vide letter dated 08.02.2012 opined that License Fee is taxable as Airport Service. Another Clarification was received from Dy. Commissioner, Service Tax on 02.05.2012 stating that on re-examination of issue the Department is of the view that the license fee is chargeable to service tax as renting of immovable property services. However, the matter has been referred to Board Office for confirmation. But, no confirmation from Board was received by the Appellants. It is claimed by the appellant that the Development Agreement was duly enclosed by M/s Aria Hotels, while seeking clarification from Chairman CBEC, vide letter dated 11.07.2011. Similarly, letter dated 17.07.2012 to Commissioner, Service Tax clearly indicates that Development Agreement dated 04.07.2009 was duly enclosed. Even the notes to clau
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ether the element of Advance Development Cost received from Developers towards development of common infrastructure facilities, is classifiable as renting of immovable property services. Department is of the view that only one agreement should have suffice and the advance receipt for specific purposes of developing common facilities under IDSA, should also be included as License Fee. As such services provided or to be provided are in relation to vacant land. After completion of investigations based on facts narrated in preceding paras, Show Cause Notice dated 10.10.2014 was issued by the Additional Director General, DGCEI (Hqrs), New Delhi under F. No 574/CE/41/20/Inv./ Pt.II/11327 dated 10.10.2014. The said Show Cause Notice was adjudicated by the adjudicating authority on contest vide the impugned order wherein demand of ₹ 54,31,68,584/-(Fifty Four Crores Thirty One Lakh Sixty Eight Thousand Five Hundred Eighty Four) was confirmed, interest demanded under Section 75 and penalti
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s or commerce. Explanation 1.- For the purposes of this sub-clause, "immovable property" includes – (i) building and part of a building, and the land appurtenant thereto; (ii) land incidental to the use of such building or part of a building; (iii) the common or shared areas and facilities relating thereto; and (iv) in case of a building located in a complex or an industrial estate, all common areas and facilities relating thereto, within such complex or estate, but does not include – (a) vacant land solely used for agriculture, aquaculture, farming, forestry, animal husbandry, mining purposes; (b) vacant land, whether or not having facilities clearly incidental to the use of such vacant land; (c) land used for educational, sports, circus, entertainment and parking purposes; and (d) building used solely for residential purposes and buildings used for the purposes of accommodation, including hotels, hostels, boarding houses, holiday accommodation, tents, camping facilities. Ex
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rights but obligation on DIAL to develop common facilities for the various developers, as well as the common public, on payment of apportioned shares of such approx developments cost, outside Asset Area-3, on all Developers. It is seen that there were financial obligations imposed on DIAL in case it failed to provide the facilities, even in future. The Infra Agreement had two components (i) Development of Common facilities (ii) Maintenance of various services, -both are in relation to real estate which were not part of Asset Area-3 and are related to Common and Public Area with no exclusive right being conferred. Under the OMD Agreement entered between the appellant and AAI, appellants had responsibilities to adhere to various construction norms, civil aviation security norms and norms of master plan of Delhi Government and of other agencies. Therefore, even while allowing development rights to developers in allocated development area, as per norms and approved plans, for common areas
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ls etc. Further, as per the terms of IDSA no profit was to be made or surplus retained by the appellant, and any excess deposit of the Advance Development Cost was liable to be returned to the 13 parties/ developers after completion of the work. Therefore, no consideration for any purported service has been retained by the appellant. The provision of gross value invoked by the Department under Section 67 of the Finance Act, 1994, for the activities performed prior to amendment of Section 67 w.e.f. May 14, 2015, can not include the value of goods and services, cost of which is only defrayed or reimbursed to the appellant even in advance, in terms of IDSA, The Department has failed to show, if any portion was retained by the Appellant as its remuneration for alleged services provided. Reliance in this regard is placed on 2018 (10) G. S. T. L. 401 (S. C.), in the matter of Union of India Vs. Intercontinental Consultants and Technocrats Pvt. Ltd. (Para 16, 22, 24, 25 and Para 29). The rele
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ovided or to be provided. On that basis, submission was that for the period in question, that is covered by these appeals, there could not be any service tax levy on reimbursed expenses, as Section 67 of the Act did not provide for such an inclusion. Mr. Mittal also referred to Para 2.4 of Circular/Instructions F. No. B-43/5/97-TRU, dated June 6, 1997 wherein it is clarified that …various other reimbursable expenses incurred are not to be included for computing the service tax . 22.Section 66 of the Act is the charging Section which reads as under: there shall be levy of tax (hereinafter referred to as the service tax) @ 12% of the value of taxable services referred to in sub-clauses of Section 65 and collected in such manner as may be prescribed. . 24.In this hue, the expression such occurring in Section 67 of the Act assumes importance. In other words, valuation of taxable services for charging service tax, the authorities are to find what is the gross amount charged for providing
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ed on May 1, 2006. Sub-section (4) of Section 67 empowers the rule making authority to lay down the manner in which value of taxable service is to be determined. However, Section 67(4) is expressly made subject to the provisions of sub-section (1). Mandate of sub-section (1) of Section 67 is manifest, as noted above, viz., the service tax is to be paid only on the services actually provided by the service provider. 29. In the present case, the aforesaid view gets strengthened from the manner in which the Legislature itself acted. Realising that Section 67, dealing with valuation of taxable services, does not include reimbursable expenses for providing such service, the Legislature amended vide Finance Act, 2015, with effect from May 14, 2015, whereby Clause (a) which deals with consideration is suitably amended to include reimbursable expenditure or cost incurred by the service provider and charged, in the course of providing or agreeing to provide a taxable service. Thus, only with ef
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A legislation is not just a series of statements, such as one finds in a work of fiction/non-fiction or even in a judgment of a court of law. There is a technique required to draft a legislation as well as to understand a legislation. Former technique is known as legislative drafting and latter one is to be found in the various principles of interpretation of statutes . Vis-a-vis ordinary prose, a legislation differs in its provenance, layout and features as also in the implication as to its meaning that arise by presumptions as to the intent of the maker thereof. Of the various rules guiding how a legislation has to be interpreted, one established rule is that unless a contrary intention appears, a legislation is presumed not to be intended to have a retrospective operation. The idea behind the rule is that a current law should govern current activities. Law passed today cannot apply to the events of the past. If we do something today, we do it keeping in view the law of today and in
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egislation or to explain a former legislation. We need not note the cornucopia of case law available on the subject because aforesaid legal position clearly emerges from the various decisions and this legal position was conceded by the counsel for the parties. In any case, we shall refer to few judgments containing this dicta, a little later. 12. Reliance in this regard is also placed on the decision of this Bench (same composition) in the matter of Premium Real Estate Developers, Rajat Yadav Vs. C. S. T. Service Tax, Delhi, Final Order No.53322-53323/2018 dated 30.09.2013, where the issue before the bench was relating to Advance receipt by the Appellants for purchase of land, Development of Land and Registration of land. The Settlement of the Accounts was still to take place and the exact component of consideration of alleged service received was still to be ascertained. The Department was of the view that advance received by the appellant itself was taxable in its hand as per Section
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ew of the discussion in the preceding paras. Para 32. Further we find that the issue relates to interpretation, and there is no malafide on the part of the appellant. The transaction is duly recorded in the books of accounts maintained by the appellant. Further, there is no suppression of information from the revenue. Accordingly, we hold that the extended period of limitation is not applicable. 13. Reliance in this regard is also placed on the decision of this Tribunal Bench- Chennai, in the case of Commr. Of C.Ex. & S.T, Madurai Vs Sashwath Construction Pvt Ltd-2018 (10) GSTL 273 (Tri-Chennai) wherein it was held- Construction of Residential Complex Service,-Amount received by builder from allottees under category easement rights for using certain common area-Taxability of-Order of authorities below holding amount being relatable to construction and land value, hence not taxable, sustainable especially when Revenue not challenged such finding on merit but only contested that the
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ich appellants were duly discharging tax liability alongwith that on the lease rent of the land of Asset Area-3. In fact, such common area facilities were outside the vacant land in Asset Area-3. For rent on immovable property service, the expression in relation to has to be read in conjunction with the expression rental . The term rental even in enlarged form of Lease, Rent, Licence, etc., cannot encompass anything done for development of the common facility/ property. There is difference between anything done in relation to renting of immovable property service and anything done in relation to immovable property per-se, which is in common domain. The latter cannot fall within the ambit of the former, 15. From the definition of Renting of Immovable Property Services as contained in Section 65(105)(zzzz), (reproduced above), it is evident that in order to be covered under renting of immovable property services, the nature of the activity should be that of renting or letting or leasing
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r of Property Act reads; 105. Lease Defined-A lease of immovable property is a transfer of right to enjoy such property, made for a certain time, express or implied, or in perpetuity, in consideration of a price paid or promised, or of money, a share of crops, service or anything of value, to be rendered periodically or on specified occasions to the transferor by the transferee who accepts the transfer on such terms. Section 52 of the Indian Easement Act, 1882 reads; License Defined-Where one person grants to another, or to a definite number of other persons a right to do, in or upon the immovable property of the grantor, something which would, in the absence of which, be unlawful and such right does not amount to an easement or an interest in the property, the right is called license Section 105 of Transfer of Property Act,1882 defines a lease of immovable property as a transfer of a right to enjoy such property made for a certain time in consideration for a price paid or promised. Un
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ourt in the case of C.M. Beena Vs P.N. Ramachandra Rao-(2004) 3 SCC 595 wherein it has been held that lease refers to conferring of a right to possess exclusively coupled with transfer of a right to enjoy the property. It is evident that the transaction of renting an immovable property includes within its scope the granting of the right to use the immovable property by way of tenancy, lease, license etc. It also includes any other arrangement of similar nature. In order to understand the scope of any other arrangement of similar nature the rule of ejusdem generis is to be applied. A lucid illustration from Salmond on Jurisprudence Twelfth Edition, page 135, is extracted with advantage; This (i.e the rule of ejusdem generis) however, is only the application of a common sense rule of language. If a man tells his wife to go out and buy butter, milk, eggs and anything else she needs, he will not normally be understood to include in the term anything else she needs a new hat or an item of f
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the general word, which follow them, By applying the principle of ejusdem generis the general term of other similar arrangement has to be interpreted in the light of the specific terms used in the definition, namely, renting, letting, leasing and licensing. 16. As discussed above the term rent means letting out or use by another person usually for fixed periodical return. It cannot encompass Development and Maintenance of common facilities, which was to be defrayed on the basis of actual expense incurred. Again lease involves transfer of rights by transferor to the transferee. In this case, there is no right vested in immovable property to be transferred to Developer, again for License a right is required to be conferred to do or continue to do something upon the immovable property of the granter. In this case however, the common area is meant for public use and such immovable property is neither the property of DIAL nor the developer. The road network, metro facilities, etc. are for t
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ble property for business or commerce, and as such, the activities in relation to the construction of building on the vacant land allotted on lease basis i.e. the charges of map approval, validation, map revision, malba charges etc. would not attract service tax. As per case of M/s Greater NOIDA Industrial Development Authority, (supra) the charges collected to undertake various municipal functions like Fire Services, Public amenities, public conveniences including street lightings, parking light, were in the nature of services to be provided by the municipalities and were liable to tax under Management Maintenance and Repair Services in respect of charges collected from allottees., even when within specified industrial area and not outside, it was regarded not as Renting of Immovable Property Service, but as Management Maintenance and Repair Services . Therefore, by no sense of imagination, the Common Area Services outside Asset Area can be regarded as Renting of Immovable Property Se
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eturned. Since there is only development of common infrastructure facilities involved (as trustee), there is no service flowing from any party to other. The common facilities developed are also outside the asset area which is in the nature of infra development and the same is neither renting of immovable property, nor in relation to renting of immoveable property. Development of common infra outside asset area cannot be said to be in relation to renting of immoveable property, as no interest in common area is transferred under IDSA to developer. In fact the services which can be in relation to renting of immoveable property are in the nature of broker services etc., and not infrastructure facilities which become part of immoveable property in common areas. In fact Section 65(105)(zzzz) explanation 1 sub clause 4 includes within the ambit of immoveable property, only such common areas and facilities which are within complex of such estates. The area outside and common facilities outside
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able services w.e.f 01.07.2010. Therefore, taxable event having occurred earlier to the point of levy of service tax, the same cannot be levied. Reliance is placed on: – (2000) 119 SCC 182 (SC), 20th Century Finance Corporation Ltd. and Anothers vs. State of Maharashtra. – 2009 (13) STR 159 (Tri. Bom): Bajaj Allianz General Insurance Co. Ltd. vs. CCE, Pune. 19. In any case the development of land or common facilities for commercial exploitation and usage by public cannot be termed as Renting of Immovable Property as it is the case of Land Development. Reliance in this regard is placed on 2015 (37) STR 859 (Tri. Del.) as confirmed in 2015 (040) STR J132 (S. C.) in the matter of Alokik Township Corporation Vs. Commissioner of Central Excise and Service Tax, Jaipur-I. (Para 7 and 7.1) :- In which matter construction of sewerage line, laying of underground water supply pipe line or of overhead water tank, construction of dividers and footpath along with plantation were clearly held as acti
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d on discussion in the preceding paras, we are of the view that the Infrastructure development cost as per IDSA is not covered under renting of immovable property and is not chargeable to service tax. a. Second issue on which the appellant has asserted is that extended period of limitation cannot be invoked in the present case and the demand, if any, is time barred. We find that there is nothing brought out on record that the appellant had any intent to evade payment of Service Tax on the consideration paid by the Developers for renting, as alleged. In fact the Appellant had paid Service Tax on the consideration being Licence Fees. There appears no suppression as everything was revealed and was available on Balance Sheet submitted to the Department during Audit conducted from July, 2012 to 2013 and also the same were reflected in ST-3 Returns. It is clear that the appellant nurtured a bonafide belief and it involves interpretation The Department was also not clear on the matter, as is
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he suppression of fact has to be with intent to evade . b. We note from the facts of the case that it was the appellant who had sought clarification from the Department regarding taxability or otherwise for various services provided by them. On 16.05.2011, Office of Commissioner gave interim reply, stating opinion was not final. On 18.11.2011 an Assistant Commissioner after visiting the site gave the opinion that tax was dischargeable as renting of immovable property. Again on 08.02.2012 an Assistant Commissioner opined that Licence Fee is taxable as Airport Service . Lastly on 02.05.2012 Deputy Commissioner of Service Tax on re-examination gave opinion that the alleged service is taxable as renting of immovable property but at the same time the matter has been referred to the Board Office. Till date no clarification from the Board has been received. It is thus clear that the matter involved both physical verification as well as examination of legal issue on which even within the Depar
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ces Agreement . Therefore, it is not correct that the appellants had not informed or misled the Department about the existence of IDSA. It is on record that all the clarification by M/s Aria and the Appellants were in relation to License Fee of vacant land and that the Legal Opinion of PWC dated 09.07.2007 had clearly indicated that the advances received towards Development of basic common infrastructure facilities were not liable to service tax either as Renting of Immovable Property Services as they do not vest any exclusive right in any immovable property in creation of common facilities or Business Support Services or Airport Services . Even when Renting of Immovable Property w.e.f. 01.07.2010, included vacant land, the opinion has remained relevant because no exclusive right stood vested in creation of common facility. d. Again as far as non- taxability of Advance Development Cost is concerned, appellant had acted on legal opinion given by PWC which had clearly opined in 2007 that
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