Service tax – Cestat Ahmedabad: Amount received as development charges are nothing but in the form of profit and would not fall under “Real Estate Agent’s Service” and hence Service tax is not leviable – Appeal allowed [Order attached]
Order date – 12 December 2022
- The Appellant, J P Infrastructure Pvt Ltd, is engaged in the business of providing real estate agent services for which they were not registered with service tax department and not paying service tax.
- During the course of scrutiny of development agreements it was revealed that Appellant has received total amount of Rs. 3,39,33,531/- as development charges @2.5% of the total construction cost from the land owner/ construction companies.
- A Show cause notice dated 08.02.2010 was issued to the appellant by the department proposing the demand of service tax along with interest and penalties. The demands were confirmed however, the adjudicating authority did not impose penalty.
- Whether the appellant is liable to discharge Service Tax liability under the category of real estate agent services for the amount received by them as development charges?
- The Tribunal finds that there is nothing in the show cause notice or the relied upon documents to show that the Appellant acted in a capacity of “real estate agent” whereas agreement show that appellant acted as developer of projects.
- It is clear from the development agreement that the amount received by the appellant as development charges which are nothing but in the form of profit, which will not get covered under the category of real estate agent services.
- Tribunal also found that all the agreements clearly have shown the activity of appellant as project developer and not as real estate agent. The activity carried out by the appellant would, therefore, not fall under “Real Estate Agent’s Service‟. Further, whether a service falls under a particular category or not will depend upon the nature of the service being provided and the legal interpretation of the documents, like contracts, agreements etc. entered by the service provider with their customers. A service will not become a particular service merely on the acceptance of the service provider.
- The Tribunal relied on the decision of this Tribunal in the case of Safal Construction Pvt. Limited (Appeal No. ST/445/2012) and agreed with the learned advocate that the services being provided by the appellant were not “Real Estate Agent‟ service so as to confirm service tax on the same. Accordingly set aside the impugned order on merits and allow the appeal.