TMI Blog2019 (2) TMI 869X X X X Extracts X X X X X X X X Extracts X X X X ..... se, 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. From the definition of Renting of Immovable Property Services as contained in Section 65(105)(zzzz),, 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 or licensing or other similar arrangements of immovable property for use in the course or furtherance of business. In the present case, there is no Service Provider-Service Recipient relationship between the appellant and the Developers, as regards the Advance development 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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) of the total land area constituting the Demised Premises. Provided however that the Non-Transfer Assets, if any, that form part of the Carved-Out Assets and/ or situated upon the Existing Leases shall be taken into account while calculating the percentage of total land area utilized for provision of Non-Transfer Assets. Same was to be on 30 years lease extendable at the consent of both the parties. 3. Appellant DIAL under the OMD Agreement, also had at its disposal vacant land situated at the Hospitality District termed Aero City . For development of these areas DIAL entered into two agreements one- termed as Development Agreement , one such detailed agreement with Silver Resort Hotel India Pvt. Ltd (SRHIPL) entered into on 26.02.2010 has been submitted with the appeal memo and the other termed as Infrastructure Development and Service Agreement (IDSA) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Hospitality 20.35 29.5.2009 29.5.2009 13 7.7 1,200,000 DB Hospitality DB Hospitality 132.00 11.11.2009 11.9.2009 Total 45.09 6,120,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ority of India dtd. 04.04.2006 was 5000 acres, out of which 62.5 acres was allowed to be developed as Hospitality District for commercial development, out of which 45 acres were earmarked as asset area and leased out to various developers, in consideration of the license fee, for development under the Development Agreements , and the appellant discharged Service Tax on the said consideration under the category Airport Service This issue is not in dispute. For developing and providing infrastructure facilities in the remaining area of the Hospitality District (other than Asset Area) the appellant entered into Infrastructure 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e issue is being referred to the Board for confirmation of views, but still the Ld. Commissioner has referred it as the final view of the Department in the impugned order. However, w.e.f. 01.07.2010 appellant discharged tax liability on License Fees received by them under Development Agreement with Silver Resort Hotel India Pvt. Ltd. (SRHIPL) entered into on 26.02.2010. Similarly the appellant has discharged tax liability on License Fees received by them under Development Agreement with other parties also. This issue is not in dispute. Prior to this on 09.07.2007 appellant had sought an opinion from M/s PWC, which had opined that no service tax was payable on vacant land as it was out of the ambit of taxable service of renting of immovable property . And same was not payable on Advance Development Cost also, as development of common facilities are not for any one exclusive developer, and cannot be considered as rent of immovable property or any other contesting service like BAS and Airport service. The relevant portions are extracted below:- 3.6. Indirect Tax Implications; A. Whether grant of right to develop, operate and maintain non-transferable assets with grant of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommon 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 would be using these common facilities and there would be no exclusive right to anybody. Since these services are neither for renting, leasing or letting out in relation to an immovable property, they would not attract any service tax under the category of Renting of Immovable Property. 2. Business Support Services; As per the definition of support service under the service tax law, this category covers the services provided for effective administration of an organization. It specifically includes service of provision of infrastructural facilities like that of office utilities, lounge, reception etc. As clarified by the CBEC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ea intended to be used for landing or departure 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 facilities are liable for service tax? The refundable deposits received by DAPL for overall development of infrastructure facilities wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he supply of all fuel, consumables and other services and all other utilities required for the construction and operation and maintenance of Assets at Asset Area-3 and DIAL shall not be responsible to provide any infrastructure in relation to any such services and/ or utilities DIAL shall provide reasonable assistance to the Developer in applying for and procuring any such connections for supply of fuel and other utilities. 7. In the meanwhile, DGCEI initiated investigation, whether 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. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is sub-clause, an immovable property partly for use in the course or furtherance of business or commerce and partly for residential or any other purposes shall be deemed to be immovable property for use in the course or furtherance of business or commerce; 11. We observe that granting of License to the Developer for the Asset Area and Development of Common infrastructure facilities, outside the Asset Area, are two independent and distinct transactions and the same cannot be considered together, so as to constitute a single transaction: The basic nature of two agreements is distinct and the same conferred different rights, obligations and therefore have a distinct scope. From the perusal of these agreements, it is clear that the Development Agreement provided exclusive right and payment of License Fees to develop Hotels etc. on the designated portion or plot of land. The Infra Development and Service Agreement (Infra Agreement) conferred no exclusive 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en 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 relevant paras are extracted below; 16. Mr. J.K. Mittal, Advocate, appeared for M/s. Intercontinental Consultants and Technocrats Pvt. Ltd. He argued with emphasis that the impugned judgment of the High Court was perfectly in tune with legal position and did not call for any interference. At the outset, he pointed out that the Parliament has again amended Section 67 of the Act, by the Finance Act, 2015 w.e.f. May 14, 2015. By this amendment, explanation has been added which now lays down that consideration includes the reimbursement of expenditure or cost incurred by the service provider. Taking clue therefrom, he developed the argument that for the first time, w.e.f. May 14, 2015, reimbursement of expenditure or cost incurred by the service provider gets included under the expression consideration , which legal reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 effect from May 14, 2015, by virtue of provisions of Section 67 itself, such reimbursable expenditure or cost would also form part of valuation of taxable services for charging service tax. Though, it was not argued by the Learned Counsel for the Department that Section 67 is a declaratory provision, nor could it be argued so, as we find that this is a substantive change brought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or attach a new disability have to be treated as prospective unless the legislative intent is clearly to give the enactment a retrospective effect; unless the legislation is for purpose of supplying an obvious omission in a former legislation 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 itse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. It is common knowledge that rent/lease rent is never subjected to such accounting on real cost basis. It is not in dispute that the maintenance element in future, was the service, on which 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 anyth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Under 108 of the said Act, the lessee is entitled to be put in possession of the property. A lease is therefore a transfer of interest in the immovable property. The transfer of interest is called the leasehold interest. The lessor parts with his right to enjoy the property during the term of the lease and it follows from it that the lessee gets that right to the exclusion of the lessor. Whereas under Section 52 of the Indian Easement Act, 1882, if a document gives only a right to use the property in a particular way or under certain terms while it remains in possession and control of the owner thereof, it will be a license. The legal possession, therefore, continues to be with the owner of the property, but the licensee is permitted to make use of the premises for a particular purpose. But for the permission his occupation would be unlawful. It does not create in his favour any estate or interest in the property. In this regard reliance is placed on the decision of the Hon ble Supreme Court in the case of C.M. Beena Vs P.N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aintenance 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 the general/common use of public and confer any rights, neither on DIAL nor on any Developers. Advance Development Cost is not consideration for any services rendered. In this regard a fine distinction has been drawn by this Tribunal, As to what amounts to Services having connection with the Renting of Immovable Property and the services which have relation to the construction of building on a vacant land allotted on free hold basis. The latter were held not taxable as they had nexus with the construction of building on the vacant land and therefore, did not attract Service Tax. Reliance in this regard is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any, was to be returned. 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 such area, are certainly not included. Advance development cost is not consideration for any services rendered, therefore, Section 67 has been improperly invoked to take gross value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... land like DLF or HUDA were to charge two amounts for the plots one for the land and the other one for the facilities and amenities like roads, water, sewerage, parks, etc. Obviously, the development charges are part of the charges meant for the land with the specific land use . The Ld. Commissioner thereby admits that all development charges are in relation to development of land with common facilities and not for renting. Therefore, based 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 Depa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 i.e prior to date of lease rent of vacant land becoming taxable Renting of vacant land was brought under service tax net w.e.f. 1.07.2010. Therefore, no tenable assertion can be made that the appellant, with deliberate intent, entered into two sets of agreements on same date, as alleged by the department, thereby ignoring the vital fact that there is a vast difference in nature and activities covered by Development Agreement and IDSA. c. It is on record that Development Agreement was enclosed by M/s Aria Hotels while seeking clarification from Chairman vide letter dated 11.07.2011 Similarly, letter dated 17.07.2012 to Commissioner, Service Tax indicates that Development Agreement dated 04.07.2009 was duly enclosed. Also the notes on clauses of the Development Agreement, in Clause No.1.1.39 clearly refer to and defines Infrastructure Development and Services 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 indicat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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