In Re : Zaver Shankarlal Bhanushali
GST
2018 (7) TMI 227 – AUTHORITY FOR ADVANCE RULING – MAHARASHTRA – 2018 (14) G. S. T. L. 429 (A. A. R. – GST), [2019] 61 G S.T.R. 189 (AAR)
AUTHORITY FOR ADVANCE RULING – MAHARASHTRA – AAR
Dated:- 22-5-2018
GST-ARA- 29/2017-18/B- 37
GST
B.V. Borhade Joint Commissioner of State Tax and Pankaj Kumar Joint Commissioner of Central Tax
PROCEEDINGS
(under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017)
The present application has been filed under section 97 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as “the CGST Act and MGST Act”] by ZAVER SHANKARLAL BITANUSHALI. the applicant, seeking an advance ruling in respect of the following issues.
1. Is GST applicable on the compensation for alternate accommodation to be paid to me (the tenant of the old building) by the developer/owner?
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Village Mohili) admeasuring 4898.61 sq.mtrs. and C.T.S. No. 837 (S.NO. 5. H. No. 6 of Village Mohili) admeasuring 497.89 sq.mtrs. and the commercial building thereon.
I, Zaver Bhanushali, am a tenant of the second floor of commercial building mentioned above. The total Area of the said tenanted premises is 2600 sq. ft. carpet area with terrace.
M/s Future Communications Limited (the owner), have entered into an agreement with M/s Spenta Residency Private Limited, the Developers, to develop a new building in place of the old building and thereby they have entered into an agreement with me (tenant) for new premises to be allotted to me in lieu of giving up the possession of the old above mentioned premises. The Owners are to provide me with a permanent alternate accommodation, shops admeasuring 4200 sq. ft. carpet area in the new building to be constructed by the developers.
It has been agreed with the developers and the owners that, during the construction period. I am to make arrang
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ai In the case of M/s Sohana Dwellers Private Limited v .s Income Tax Officer 8(3)(1) (ITA No. 5963/Mum 2013) for A.Y. 2010-11. The same is also not liable to TDS u/s 1941 of the Income Tax Act. ”
On the basis of the above, the questions as reproduced above have been raised.
03. CONTENTION – AS PER THE CONCERNED OFFICER
The submission, as reproduced verbatim, could be seen thus-
“As per the brief facts given by the applicant, M/s Future Communications Ltd. owned a commercial building at C.T.S. No. 837 wherein Shri Zaver Bhanushali was a tenant. In other words, the applicant viz. Shri Zaver Bhanushali was recipient of renting of premises services from Mis Future Communications Ltd. However, as per the tri-party agreement between M/s Future Communications Limited (Owner of the land). M/s Spenta Residency Private Ltd (Developer) and Shri Zaver Bhanushali (tenant of the old building,), the applicant has to vacate the rented premises occupied by him for minimum of 2 years and maximum as
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high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel shall be levied with effect from such date as may be notified by the Government on the recommendations of the Council. (3) The Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both. Scope of supply. Tax liability on composite and mixed supplies. Levy and collection. 14 THE GAZETTE OF INDIA EXTRA ORDINA RY [PART II- (4) The central tax in respect of the supply of taxable goods or services or both by a supplier, who is not registered, to a registered person shall be paid by such person on reverse charge basis as the recipient and all the pr
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be made for a consideration by a person in the course or furtherance of business: (b) import of services for a consideration whether or not in the course or furtherance of business: (c) the activities specified in Schedule I. made or agreed to be made without a consideration. and (d) the activities to be treated as supply of goods or supply of services as referred to in Schedule II.
Under Schedule-ll at sr. No. 5(e) it has been specified as under :
“agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act: and” will be treated as supply of services. In view of the above legal provisions, for levy of tax in GST regime: following requirements are to be fulfilled.
(i) There should be 'goods' or 'services' or 'goods & services'
(ii) There should be supply of goods, or services or goods & Services.
(iii) The supply should be in the course of furtherance of business'.
In the instant case, it is seen that the ap
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commodation, shop admeasuring 4200 sq. ft. provided to the applicant and the GST paid by the applicant on compensation would be available as input tax credit to the developer.
In view of the above this office is of the view that the applicant should take GST registration for compensation received and pay appropriate GST on the same, in respect of consideration received for alternate accommodation. ”
04. HEARING
The case was taken up for preliminary hearing on dt.27.03.2018 with respect to admission or rejection of the application when Sh. Harshit Kadhi, Chartered Accountant attended alongwith Mrs. Zaver Bhanushali, applicant and Sh. Shankarlal Bhanushali. They requested for admission of application as per their written submission.
During hearing, Sh. V. D. Gawade (Superintendent), Jurisdictional Officer stated that they have made written submissions and they do not have objection to admission of application. The applicant orally stated that they do not require final hearing in the
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ED (PAN AAMPS22I0H),a company registered under the Companies Act, 1956 and having it's registered office at Rajabahadur Mansion. 1st floor, 20, Ambalal Doshi Marg, Fort, Mumbai – 400023 hereinafter referred to as the 'DEVELOPERS' (which expression shall unless repugnant to the context or meaning thereof mean and include it's successors and assigns) of the Second Part represented by its Directors (1) SHRI FARSHID ASPAN COOPER (PAN : ADVPC59 76F) of Mumbai. Indian Inhabitant residing at 501, Aventa, 16A, Allamount Road. Mumbai – 400036 and (2) SHRI GAGANDEEP SINGH MANGAT, (PAN AA VPM7257L) of Mumbai, Indian Inhabitant residing at 1901, Spenta Towers. 55-57, Forjet Street, Mumbai – 400036., the present directors of the Company hereinafter referred to as the PARTIES OF THE SECOND PART (which expression shall unless repugnant to the context or meaning thereof mean and include their respective heirs, executors and administrators ) AND (1) SMT. ZAVER alias ZAVERBEN SHANKAR BHA
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for the consideration and upon the terms and conditions therein mentioned.
(e) The existing building standing on the plot of land bearing C. T.S. No.837 out of the said Property was constructed somewhere in the year 1970 and the same is consisting of ground and two upper floors having commercial premises. The Tenants are in use, occupation and possession of office premises admeasuring 2600 sq.ft, carpet area on the Second Floor with the terrace premises of the said Budding for use of water storage tanks and air conditioning systems (hereinafter referred to as the said old premises').
(f) The Tenants were the tenants of Aditya Textile Industries Private Limited in respect of the said old premises since the year 1994 at the rent of Rs. 5,000/- per month inclusive of all other maintenance, security and municipal property taxes. Upon execution of the above recited Conveyance dated 16th April, 2007 by the said Aditya Textile Industries Private Limited in favour of Future Communication
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elopment of the said Property.
(l) ……Finally the Owners and the Developers have agreed to provide to the Tenants the shops admeasuring 4200 sq. ft. carpet area in the new building free of cost on ownership basis as permanent alternate accommodation upon the terms and conditions agreed by and between the parties hereto which are now recorded in writing by executing this Agreement.
NOW THIS AGREEMENT WITNESSETH AND IT IS AGREED BY AND BETWEEN THE PARTIES HERETO AS UNDER –
2. The Tenants are in use, occupation and possession of the office premises being admeasuring 2600 sq. ft. carpet area (approx.) on the Second floor of the said Building standing on the portion of the said Property shown by…………….. colour wash/…………………….colour boundary line on the plan hereto annexed and marked Annexure : A (hereinafter referred to as the said Old Premises').
4. The floor height of the said old Premises on second floor is 14 feet. Under the said letter dated 10/07/201
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annexed hereto and marked as Annexure : B' and thereon shown surrounded by red colour boundary line (hereinafter referred to as 'said New Premises ').
8. The Owners hereby confirm that the Tenants have paid to the Owners the rent, taxes and other outgoings in respect of the said Old Premises upto date and now no further amount is due and payable by the Tenants to the Owners in respect of the said Old Premises for the period upto the date of this Agreement. The Tenant shall continue to pay to the Owners the rent in respect of the said Old Premises at the rate of Rs. 5000/- per month till the date on which the Owners and the Developers handover to the Tenants the possession of the said New Premises as provided in this Agreement. Upon obtaining the possession of the said New Premises from the Owners and the Developers the Tenants shall surrender their tenancy rights in respect of the said Old Premises.
14. The Owners and the Developers hereby specifically agree and confirm t
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building the Tenants shall make their own arrangement for temporary alternate accommodation and the Owners/the Developers shall pay to the Tenants the rent/compensation for the temporary alternate accommodation to be arranged by the Tenants at the rate of Rs. 2,05, 000/-(Rupees Two Lacs Five Thousand only) per month for the period of first 24 months. It is agreed and confirmed that on the execution of this Agreement within 15 days from the date hereof. The Tenant shall hand over quiet, vacant and peaceful possession of the old premises to the Owner and Developers and against the same the Tenant will be paid Rs. 48,00,000/-(Rupees Forty Eight Lacs Only) at a time by a single cheque for the said period of 24 months, the rent/compensation as mentioned above.
18. The Owners and the Developers hereby agree and confirm that the Developers shall complete the construction of the new building as per sanctioned plans within 24 months from the date of issuance off Commencement Certificate subje
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the said New Premises within 24 months then in that event at the end of the period of 24 months the Owners/the Developers shall give the post dated cheques to the Tenants towards the rent for the period front 25th month to 36th month at the rate provided hereinabove.
20. Subsequent to what is mentioned in Clause 19 above, the Owners and/or the Developers hereby confirm that in the event the Owners and/or the Developers are unable to handover the possession of the said New Premises to the Tenants within 36 months the Owners and the Developers shall be liable to pay to the Tenants Rs. 5,00,000/- (Rupees Five Lakhs only) per month as damages without prejudice to the Tenants ' other rights under the law and under this Agreement.
21. The Owners and the Developers hereby confirm that (i) the Developers shall provide to the said New Premises the amenities and specifications as specified in the Second Schedule hereunder written and (ii) the Developers at their own cost shall provide the
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n is about the receipt by the applicant, of certain sums towards –
a. Compensation for alternate accommodation for the period of first 24 months.
b. Compensation for alternate accommodation for the further period from 25th month to 36th month and damages for delayed handover of possession after the period of 36 months.
Section 9 of the GST Act says that there shall be levied a tax on supplies of goods or services or both. So we need to understand as to whether the aforesaid receipt of amounts would be for a supply made by the applicant. A 'supply' defined under Section 7 of the GST Act is as follows –
“7. (1) For the purposes of this Act. the expression “supply” includes –
(a) alt forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business;
(b) import of services for a consideration whether or not in the course or
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n 7] ACTIVITIES TO BE TREATED AS SUPPLY EVEN IF MADE WITHOUT CONSIDERA TION
1. Permanent transfer or disposal of business assets where input tax credit has been availed on such assets.
2. Supply of goods or services or both between related persons or between distinct persons as specified in section 25, when made in the course or furtherance of business: Provided that gifts not exceeding fifty thousand rupees in value in a financial year by an employer to an employee shall not be treated as supply of goods or services or both.
3. Supply of goods-
(a) by a principal to his agent where the agent undertakes to supply such goods on behalf of the principal; or
(b) by an agent to his principal where the agent undertakes to receive such goods on behalf of the principal.
4. Import of services by a taxable person from a related person or from any of his other establishments outside India, in the course or furtherance of business.
SCHEDULE II /See section 7/ ACTIVITIES TO BE TREATED AS SUP
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on carrying on the business so as no longer to form part of those assets, whether or not for a consideration, such transfer or disposal is a supply of goods by the person;
(b) where, by or under the direction of a person carrying on a business, goods held or used for the purposes of the business are put to any private use or are used, or made available to any person for use, for any purpose other than a purpose of the business, whether or not for a consideration, the usage or making available of such goods is a supply of services;
(c) where any person ceases to be a taxable person, any goods forming part of the assets of any business carried on by him shall be deemed to be supplied by him in the course or furtherance of his business immediately before he ceases to be a taxable person, unless
(i) the business is transferred as a going concern to another person; or
(ii) the business is carried on by a personal representative who is deemed to be a taxable person.
5. Supply of.service
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respective local body of the city or town or village or development or planning authority:
(2) the expression “construction” includes additions, alterations, replacements or remodelling of any existing civil structure:
(c) temporary transfer or permitting the use or enjoyment of any intellectual property right:
(d) development, design, programming, customisation, adaptation, upgradation, enhancement, implementation of information technology software:
(e) agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act; and
(f) transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration.
6. Composite supply
The following composite supplies shall be treated as a supply of services, namely:
(a) works contract as defined in clause (119) of section 2: and
(b) supply, by way of or as part of any service or in any other manner whatsoever, of goods, bei
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cally mentioned in the clause, if we look at Schedule I, as reproduced above, the 'supply' herein would be in the course or furtherance of business.
* 'Supply' as per clause (d) is the enumeration or categorization as given in Schedule II appended to the GST Act as to which activities should be treated as supply of 'goods' and which activities to be treated as supply of 'services'. The clause does not define 'supply' but classifies the supply into either 'supply of goods' or 'supply of services'. [Clause (e) of Schedule II defines “agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act” as a Supply of Services].
Further, Sub-section (2) of section 7 states that –
* certain, specified or notified activities shall be treated neither as a supply of goods nor a supply of services.
We also find that Sub-section (3) of section 7 states that-
* that certain activities would be not
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the possession of the said New Premises as provided in this Agreement.
2. However for vacating the said premises, During the period of construction of the new building the Tenants shall make their own arrangement for temporary alternate accommodation and the Owners/the Developers shall pay to the Tenants the rent/compensation for the temporary alternate accommodation to be arranged by the Tenants at the rate of Rs. 2,05, 000/- (Rupees Two Lacs Five Thousand only) per month for the period of first 24 months and against the same the Tenant will be paid Rs. 48,00,000/- (Rupees Forty Eight Lacs Only) at a time by a single cheque for the said period of 24 months, the rent/compensation as mentioned above.
3. Further, we also find the condition that in the event the Developers are unable to complete the construction of the new building within 24 months and handover the possession of the said New Premises to the Tenants with Occupation Certificate due to reasons beyond their control the Deve
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ossession of the said New Premises to the Tenants within 36 months the Owners and the Developers shall he liable to pay to the Tenants Rs. 5,00,000/- (Rupees Five Lakhs only) per month as damages without prejudice to the Tenants' other rights under the law and under this Agreement.
5. Thus we find that for vacating the said premises, the applicant has received/is to receive compensation from the developer as per details mentioned above.
6. It is also to be noted that for their premises in the old building, after redevelopment is complete the applicant is to receive newly constructed and redeveloped property as per the below mentioned clause of the agreement.
” The flour height of the said old Premises on second floor is 14 feet. Under the said letter dated 10/07/2011 the Owners and the Developers have agreed to provide to the Tenants the new premises admeasuring 3250 sq. ft. carpet area (consisting of 2600 sq. ft. area presently occupied by the Tenants and 650 sq. ft. area being
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oper implies that the applicant has agreed to do an act and such act, of vacating the premises, by the applicant, squarely falls under clause 5(e) of the Schedule II mentioned above and therefore the amounts received by the applicant for having agreed to do such an act, would attract tax liability.
Thus from the above referred terms of the agreement for redevelopment of the premises referred above we find that even during the period of redevelopment, the applicant remains a tenant of the owners of the old premises and continues to pay them due rent @ Rs. 5,000/- per month. However in lieu of they vacating the rented premises for redevelopment as per the agreement of redevelopment as referred above, the applicant is agreeing to the obligation to the obligation to refrain from an act or tolerating an act or situation of redevelopment in place of old premises and of not causing hindrance or creating obstacle in the same.
We observe herein that the receipt of amounts towards alternate ac
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n extent that, the said amounts are in the form of compensation paid to them, to do an act i.e. vacating the premises redevelopment as well as tolerating construction cum redevelopment work during the specified period of redevelopment as per their agreement referred above and also to tolerate an act i.e. the act of not having received the New Premises within 36 months from the developer.
06. In view of the extensive deliberations as held hereinabove, we pass an order as follows :
ORDER
(under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017)
NO.GST-ARA- 29/2017-18/B- 37
Mumbai, dt. 22/05/2018
For reasons as discussed in the body of the order, the questions are answered thus –
Q.1 Is GST applicable on the compensation for alternate accommodation to be paid to me (the tenant of the old building) by the developer/owner?
A.1 Answered in the affirmative. GST is applicable on the compensation for alternate ac
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