“Flat Purchase Agreement” not subject to service tax: HC

Sudha Sharma appointed as Member of CBDT Rupee hits a high of 48.73 against Dollar Excise Officers caught burning official files in midight in Aligarh after Income Tax raids on Ponty Chadha SC cancels 122 licences issued by A Raja during his tenure as Telecom Minister Laxman Das is Officiating Chairman of CBDT Tariff Value for import of gold is 556 & for silver 1067 & for Brass Scrap 4078 & for poppy seeds 2205-Customs Non-Tariff Notification No. 10 Fused Silica is classifiable under Tariff Item 32074000-Customs Circular No.3 Additional Commisssioner of Income Tax HA Siddiqui sentenced to 4 years imprisonment for accepting bribe of Rs 1 Lakh by CBI Court in Delhi Exchange Rate for imported goods is Rs 50.20 Per US Dollar & Rs 66 per EURO-Exchange Rate for export goods is Rs 49.40 per US Dollar & Rs 64.40 per EURO HC upholds levy of service tax on booking of flats-The explanation which was inserted by the Finance Act of 2010 clearly brings within the fold of taxable service a construction service provided by the builder to a buyer where there is an intended sale between the parties whether before, during or after construction Authority for Advance Ruling rules super concentrates shall be classified as products of the chemical industry under heading 3824 90 90 of Customs Tariff Anti dumping duty imposed on import of Morpholine from China European Union & USA Anti dumping duty imposed on import of Geogrid/Geostrips/ Geostraps made of polyester or Glass fiber in all its forms from Refund of Anti-Dumping Duty (Paid in Excess of Actual Margin of Dumping) Rules, 2012 notified-Customs Non-Tariff Notification No.5 Customs Tariff (Identification, Assessment and Collection of Anti-dumping Duty on Dumped Articles and for Determination of Injury) Amendment Rules, 2012-Customs Non-Tariff Notification No.6 Safeguard duty at the rate of 10% ad valorem notified on import of Phthalic anhydride, falling under tariff item 2917 35 00-Customs SG Notification No.1 Customs duty 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“Flat Purchase Agreement” not subject to service tax: HC

AIT News Network

GAUHATI. Giving a breather to Real Estate Developers on whose neck the sword of service tax demands on agreement for sale of flats was hanging consequent to Advance Ruling in case of Hare Krishna Developers AIT-2008-127-AAR; Gauhati High Court vide a recent ruling AIT-2008-213–HC has ruled that “flat purchase agreement” is not subject to service tax. Any advance, made by a prospective buyer, or deposit received by the petitioner-company, is against consideration of sale of the flat/building to such prospective buyer and not for the purpose of obtaining “service” from the petitioner-company.

The High Court ruled as under:

The circular, dated August 1, 2006 is binding on the department and this circular makes it more than abundantly clear that when a builder, promoter or developer undertakes construction activity for its own self, then, in such cases, in the absence of relationship of “service provider” and “service recipient”, the question of providing “taxable service” to any person by any other person does not arise at all. In the present case too, the materials placed by the writ petitioners clearly show that the construction activities, which the petitioners have been undertaking, are in respect of the petitioners' own work and it is only the completed construction work, which is sold by the petitioner-company to the buyers, who may have made agreements for sale before the construction had actually started or during the progress of the construction activity or at the end or completion of the construction activity. Any advance, made by a prospective buyer, or deposit received by the petitioner-company, is against consideration of sale of the flat/building to such prospective buyer and not for the purpose of obtaining “service” from the petitioner-company.
In the light of the various statutory definitions of “service”, one can safely define “service” as an act of helpful activity, an act of doing something useful, rendering assistance or help. Service does not involve supply of goods ; “service” rather connotes transformation of use/user of goods as a result of voluntary intervention of “service provider” and is an intangible commodity in the form of human effort. To have “service”, there must be a “service provider” rendering services to some other person(s), who shall be recipient of such “service”.
Any part of constructional activity for construction of building, which is carried out by the petitioner-company, is not a “service” rendered to any one, but an activity, which is carried out by the petitioner-company, for its own self. Since the very concept of rendering of “service” implies two entities, one, who renders the “service”, and the other, who is recipient thereof, it becomes transparent that an activity carried on by a person for himself or for his own benefit, cannot be termed as “service” rendered.
The decision of the apex court in K. Raheja Development AIT-2005-94-SC, is not applicable to the case at hand inasmuch as this decision was rendered on the facts of its own case. The petitioner-company is not shown to have undertaken any construction work for and on behalf of proposed customer/allottees and the title, in the flat/apartments so constructed, passes to the customer only on execution of sale deeds and registration thereof. Until the time the sale deed is executed, the title and interest, including the ownership and possession in the constructions made, remain with the petitioner-company. The payments made by prospective purchasers, in instalments, are aimed at facilitating purchase of the flat/premises by these probable purchaser so that they may not be required to pay whole of the price at a time. From the condition so incorporated in the relevant agreement for sale, it cannot be inferred that the petitioner-company is making construction for and on behalf of the probable allottees or purchasers.
There is no material to show that the petitioner-company constructs the flat/apartments on behalf of the prospective allottees and, hence, it cannot be said that the constructions, done by the petitioner-company, are the constructions undertaken by the petitioner-company for and on behalf of their prospective buyers/allottees. Thus, there is no “service” rendered by the petitioner-company to the prospective allottees. Similar view has been taken by the Allahabad High Court in Assotech Realty Private Limited v. State of Uttar Pradesh AIT-2007-220-HC.

(Click here for full text of Ruling AIT-2008-213–HC)

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