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TMI Blog2013 (8) TMI 295X X X X Extracts X X X X X X X X Extracts X X X X ..... ation in this proceeding. 2. Arguing for the appellant, the Counsel submits that the impugned construction was done on land of the applicant and hence applicant was doing activities for its own benefit and there were no service provider and service recipient in this case and hence demand for service tax is not sustainable. The Counsel submits that the applicant has to be considered as a Developer of Housing project and CBEC has clarified vide Circular 108/02/2009 dated 29-01-2009 and Circular 334/3/2010 dated 26/10/2010 and 151/2/2012-ST dated 10-02-2012 that there was no liability on Developers to pay service tax. She submits that this position changed only from 01-07-2010 when a new explanation was added in section 65 (105) (zzzh) of Finance Act, 1994, defining the relevant taxable service, and the demands in the present appeals relate to periods prior to that date. 3. She did not contest the fact that the applicants model of business was to first enter into agreements with prospective buyers of flats for sale of Undivided Shares (UDS) of land which were first registered in the name of the buyers. Thereafter, construction was undertaken by the applicant and payments were colle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roduced in Finance Act, 1994. 8. She relies on the following decisions: (i) Commissioner of Income Tax Vs. M/s Sanghvi and Doshi Enterprises- in TC (A) Nos. 581 and 582 of 2011 decided Hon Madras High Court on 01-11-2012; (ii) CST Vs. Shrinandnagr-IV Co-op. Society Ltd (2011) 23 STR 439; (iii) Mohitasham Complexes (P) Ltd Vs. CCE-(2010) TIOL 1750. 9. The decision in the case of Sanghvi and Doshi Enterprise (supra) was canvassed at length to argue that as per the decision the business risk of constructing the residential complex was on the applicant and hence the applicant should be considered as a developer. Then she relies on the clarification of CBEC to argue that a developer need not have paid any service tax. 10. She also pleaded that the demand is partly time barred because the Show Cause Notice dated 24-03-2010 covered the period 01-04-06 to 30-09-08, SCN dated 15-07-2010 covered the period 01-10-08 to 30-09-09 and SCN dated 15-02-2011 covered period from 01-10-09 to 30-06-10. She argues that in view of the circulars issued by CBEC the appellant was under the bonafide belief that developers need not pay service tax 11. The Ld. Counsel pleaded that the case may be admit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilders and construction contractors to claim deduction u/s 80IB of the Income Tax Act. 16. The relevant part of section 80IB (10) reads as under: The amount of deduction in the case of an undertaking developing and building housing projects approved before the 31st day of March, 2008 by a local authority shall be hundred per cent of the profits derived in the previous year relevant to any assessment year from such housing project if, .... 17. The Court decided that in that case land owner was to get Rs. 11,51,94,000/- as per the agreement between the land owner and the developer. The job of finding buyers for the UDS and also collecting money for construction was on the developer. Revenue had argued that the appellant therein was only a developing and not doing developing and building. The court observed that when such a project starts there may not be identified buyers for all flats to be constructed and the risk due to such situation was on the developer and not on the land owner. Since the business risk was with the appellant therein the Court decided that the appellant therein was eligible to get the deduction from income as per the provisions of section 80IB(10) and not the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essence of the clarifications issued by CBEC. When UDS is sold the person to whom UDS is sold becomes the legal owner of UDS. The fact that there is an agreement giving possession to the applicant to do construction activity cannot be interpreted to mean that the applicant continued to be the owner of the land. Applicant's right is diminished to the extent UDS is sold. In the case of residential complex constructed nobody gets full title to the land. Right of each buyer is subject to the right of others. The clause in the agreement for construction creates a lien on the land sold in favour of the applicant who advances money for construction, if necessary. In most cases money is collected in advance from the buyers of UDS. But if there is no buyer for certain flats at initial stage or any buyer defaults on payment of installment, the applicant had to advance his money to carry on the construction activity. In such situation the lien only helps him to take possession of land and sell it to another person. This clause cannot be interpreted to mean that the initial transfer was not complete. The taking over is a separate transaction arising because of subsequent financial transactions ..... X X X X Extracts X X X X X X X X Extracts X X X X
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