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2019 (8) TMI 386

..... payment of service tax - period 1.06.2007 to 31.03.2012 and period 01.04.2012 to 31.03.2013 - Agreement to Lease - Cum Tax benefit - extended period of limitation - difference of opinion. HELD THAT:- Both Member (Technical) and Member (Judicial) recorded different opinion on the issue - Service Tax Miscellaneous Application No. 85210/2019 in Service Tax Appeal No. 89766/2013, 88472/2014, 86197/2015, 86274/2015, 87442/2015 - A/86348-86352/2019 - 5-8-2019 - Mr. Sanjiv Srivastava, Member (Technical) And Dr. Suvendu Kumar Pati, Member (Judicial) Shri V. Sridharan, Sr. Advocate with Shri Vinay Jain, C.A. for the Appellants Shri Roopam Kapoor with Shri M.K. Sarangi, Authorised Representatives for the Respondent ORDER PER: SANJIV SRIVASTAVA The application for early hearing is allowed. Appeals taken up for disposal. 2.1 The appeals detailed in table below are directed against the order/ demand notice as indicated. Appeal No ST/89766/13 ST/88472/14 ST/86197/15 ST/86274/15 ST/87442/15 SCN Date 19.10.2012 Period of Dispute 01.06.2007 - 31.03.2012 01.04.2012 - 31.03.2013 01.04.2012 - 31.03.2013 01.04.2013 - 31.03.2014 01.04.2013 - 31.03.2014 OIO/Demand Notice Date 29.08.2013 06.05.2014 27.02. .....

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..... ing to service. ii. The allotment of plots by them as an agent of the state is a statutory function which could be performed only by state and therefore does not amount to service. iii. They are only an agent of the state of Maharashtra and not the service provider. iv. The transactions don not amount to renting of immovable property. v. During the period of Agreement to Lease there is no lessor-lessee relationship hence the order of Commissioner confirming the demand cannot be sustained. vi. Commissioner has not given any exclusion on account of renting of vacant land. vii. The amounts received by them as lease premium is towards the grant of right and not towards rendition of service. viii. Demand has also been made in respect of plots meant for residential use and for hotels. ix. Cum Tax benefit has not been allowed while making the demand. x. Extended period of limitation for making the demand has been wrongly invoked, despite there being many reasons to show that there was no suppression. xi. Decisions of Tribunal in case of Greater Noida Industrial Development Authority [2013 TIOL 44 (T-Del)] Bombay High Court in Percival Joseph Pareira vs The Special Land Acquisition Officer .....

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..... e property in the form of rent and not the consideration for transfer of right to enjoy the immovable property in form of lease premium. In case of A R Krishnamurthy [1982 (133) ITR 922 (Mad)] Madras High Court ahs after taking into account all the law on subject has held that the right of the owner to be in possession and enjoyment as such owner is a distinct right which can be transferred separately from the right to receive royalties or rents from tenants for a continued enjoyment of that right. The transfer of first right i.e. right to be in possession and enjoyment of the property is a transfer of immovable property and consideration for the same is lease premium. The decisions in case of RIICO [2018 (10) GSTL (T-Del)] Hobbs Brewers India Pvt Ltd [2016 (45) STR 60 (Tripura)] are not the law on the above contention that is being raised by the appellants herein. The contention of the Appellants is not that because the lease is long term, it is not included in the definition of renting of immovable property. It is also not their contention that the lease is a transfer of capital asset and thus not leviable to service tax. What is taxable under Section 65(105)(zzzz) read with Sect .....

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..... ication No 25/2012 dated 20.06.2012. Appellant qualify as governmental authority, being a body set up by an act of state legislature namely Maharashtra Regional and Town Planning Act, 1966 vide Section 113(3A) thereof and established with 100% control of Government of Maharashtra. viii. The amendment made in the definition of governmental authority as defined in notification 25/2012-ST by notification No 2/2014-ST w.e.f 30.01.2014 shall apply retrospectively. Any statute which is curative, classificatory and explanatory or merely declaratory of previous law; retrospective operation is intended. [Allied Motors Private Ltd [1997 (224) ITR 677 9SC)] ix. They are in any case entitled to exemption under Notification No 25/2012-ST after its amendment by Notification No 2/2014-ST wef 30.01.2014. RIICO [2018 (10) GSTL 92 (T-Del)] x. Appellant is merely an agent of the Government of Maharashtra. {CIDCO vs Percival Joseph Pareira [2013 (4) Mh. L J-762] Land is owned by government. Consequently, lease premium also belongs to government. Article 289(1) exempts the property of State from Union Taxation. Thus no service tax is payable. xi. In case of New Delhi Municipal Corporation vs State of P .....

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..... [2018 (18) GSTL 232 (Bom)] ii. The issue that Appellant was performing sovereign functions has also been examined by the Chhattisgarh High Court in case of Chhattisgarh State Industrial Development Corporation Ltd [2018 (17) GSTL 593 (Chhattisgarh)] and it was held that they are liable to pay tax. Thus the sovereign functions are limited to the activities conducted by the state itself and not one of the entities of the state. iii. Nine Member Bench of Hon ble Supreme Court [1964 (3) SCR 787] on the Presidential Reference considered the issue vis a vis Article 289 of Constitution and has held in favour of taxation of such transactions of state. iv. Appellants had not given the details of the case wherein the demand of service tax has been made in respect plots allocated for residential purpose. v. The counsel for appellant while submitting that tribunal has in various decision held that leasing of vacant land was taxable w.e.f 1.07.2010, he has only sought to raise a new issue to the effect that only the further leasing of already leased land alone is taxable from 1.07.2010. It is only twisting word of statue which have been correctly interpreted by the court or tribunal. vi. Appell .....

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..... l)] b. Chennai Port Trust [2017 (5) GSTL 394 (T-Chennai) c. Hindustan Petroleum Corporation [2015 (38) STR 131 (T-Mum)] 5.1 We have considered the impugned orders along with the appeals and submissions made during the course of hearing and in written submissions filed by both the parties. 5.2 The issues for consideration before us are s listed below: i. Whether in terms of the 65(105)(zzzz) Service Tax can be levied on the lease of vacant land given by the Appellants. ii. Whether the lease premium recovered from the lessee against agreement to lease entered into by appellants is subjected to service tax under the taxable category. iii. Whether the activities undertaken by the appellant qualify to be service as defined by Section 65B(44) of Finance Act, 1994 with effect from 1st July 2012 iv. Whether appellants qualify to be the government authority for the purpose of exemption notification No 25/2012-ST. v. Whether the extended period of limitation can be invoked in the facts and circumstances of this case for making the demand of service. vi. Whether appellants are liable to pay interest on the service tax short paid/ not paid by them by the due date. vii. Whether penalties under .....

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..... sub-clause (zzzz),- (i) for the portion beginning with the words "to any person" and ending with the words "business or commerce", the following shall be substituted and shall be deemed to have been substituted with effect from the 1st day of June, 2007, namely:- "to any person, by any other person, by renting of immovable property or any other service in relation to such renting, for use in the course of or for furtherance of, business or commerce."; (ii) in Explanation 1, after item (iv), the following item shall be inserted, namely:- "(v) vacant land given on lease or license for construction of building or temporary structure at a later stage to be used for furtherance of business or commerce;"; 5.3.4 The section as amended was given retrospective effect by the validation provisions incorporated in section 77 of the Finance Act, 2010. This section is reproduced below: Section 77: Validation of Action Taken under sub clause (zzzz) of clause (105) of Section 65 Any action taken or anything done or omitted to be done or purported to have been taken or done or omitted to be done under sub-clause (zzzz) of clause (105) of section 65 of the Fin .....

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..... porary structure at a later stage to be used for furtherance of business or commerce would attract Service Tax under Section 65(105)(zzzz) read with Section 65(90a) from 1-6-2007, the date on which the Service Tax on renting of immovable property had become leviable or the same is chargeable w.e.f. 1-7-2010 when clause (v) was added to the inclusive portion of the definition of immovable property in Section 65(105)(zzzz) and whether for this purpose, the long term leases of vacant land are excluded from the purview of Section 65(105(zzzz) read with Section 65(90a) of the Act? 9.1 The question as to whether giving vacant land on lease, lease or rent for construction of a building or temporary structure at a later stage for furtherance of business or commerce is taxable from 1-6-2007, the date on which the Service Tax on renting of immovable property had been introduced or w.e.f. 1-7-2010 when Clause (v) had been added to the Explanation-I to Section 65(105)(zzzz) has been examined by this Tribunal in detail in its Final Order No. ST/A/58664/2013-CU(DB), dated 11- 12-2013 in the case of New Okhla Industrial Development Authority v. Commissioner of Customs, Central Excise & Servic .....

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..... solely used for agriculture, aquaculture, farming, forestry, animal husbandry, mining purposes; (b) vacant land, whether or not having facilities clearly incidental to the use of such vacant land; (c) land used for educational, sports, circus, entertainment and parking purposes; and (d) building used solely for residential purposes and buildings used for the purposes of accommodation, including hotels, hostels, boarding houses, holiday accommodation, tents, camping facilities. Explanation 2. - For the purposes of this 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; Section 75 of the Finance Act, 2010 introduced several amendments to Chapter V of the Act. In so far as Section 65(105)(zzzz), the 2010 amendments substituted the main provision of sub-clause (zzzz) and enjoined this substitution to operate with retrospective effect from 1-6- 2007. Sub-clause (v) was also introduced, to Explanation (1) in the provision. This sub-clause reads : vacant land, given on lease or licence for .....

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..... nary and exclusionary clauses (in particular sub-clause (b) of the exclusionary clause) in Section 65(105)(zzzz), renting of vacant land was clearly outside the purview of the taxable service, prior to 1-7-2010. 12. Introduction of sub-clause (v) in Explanation 1 has significantly altered and extended the scope of the taxable service, with effect from 1-7-2010 and consequently vacant land given on lease or licence, for construction of a building or a temporary structure, to be used at a later stage for furtherance of business or commerce, would be immovable property and renting of this immovable property would be the taxable service, since 1-7-2010. 5.3.6 This decision of tribunal has been upheld by the Hon ble Allahabad High Court at [2015 (40) STR 95 (ALL)] stating as follows: 4. With effect from 1st June, 2007, Section- 65(105)(zzzz) was introduced in Finance Act, 1994. The section provides for Service Tax to be levied on service provided to a person by any other person of renting of immovable property or any other service in relation of such renting for use in course of, or for furtherance of business or commerce. Explanation-I to Section-65(105)(zzzz) defines immovable propert .....

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..... provided under first notice? (ii) Whether long terms leases in respect of vacant land would be covered by taxable service under Section 65(105)(zzzz) of Finance Act, 1994? (iii) Whether Greater Noida Industrial Development, Noida constituted under the Industrial Development Act, 1976 can be said to be a body discharging sovereign functions and outside the purview of Service Tax? (iv) Whether the leases granted in respect of vacant land by appellant before 1-7-2010 would be taxable under the aforesaid statute? 17. Learned counsel for the appellant vehemently submitted before us that the activities assigned to the assessee were sovereign/public/statutory duties. It is their case that the long term lease of vacant land for 90 years or lease in perpetuity of vacant land was not taxable under Section 65(105)(zzzz) of the Finance Act, 1994 specifically in the circumstance when the Tribunal itself has come to a conclusion that the premium charged for such lease will not be taken into consideration for the purposes of determining the tax liability. It is their case that transactions cannot be held to be taxable for one part and not for the other. It is further contended that the second sho .....

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..... 8) 3 SCC 594 relied upon by the assessee deals with the transfer of property within the meaning of Section 12-B of the Income Tax Act and is, therefore, clearly distinguishable in the facts of the case. 23. The Tribunal appears to be justified in recording that the letting of vacant land by way of lease or license irrespective of the duration or tenure for construction of building or temporary construction for use in the course or furtherance of business or commerce is taxable w.e.f. 1st July, 2010 in view of Clause (v) of Explanation 1 to Section 65(105)(zzzz) of the Finance Act, 1994. 24. So far as the term lease is concerned, it may be recorded that it has not been defined under the Finance Act, 1994. The term lease would cover a lease for any period including a lease in perpetuity, as will follow from simple reading of Section 65(90a). The Finance Act, 1994 does not carve out any distinction in the matter of long term lease/lease in perpetuity or lease for short duration, so far as the charging section is concerned. 25. The word lease as contemplated by the Transfer of Property Act, vis-a-vis license has been explained by the Apex Court in the case of Associated Hotels of India .....

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..... of India, which has been so heavily relied upon by the appellant is concerned, we may record that under Clause 032.01, it has been provided that the Prasar Bharati Corporation (Doordarshan and All India Radio), which has been constituted under the Prasar Bharati (Broadcasting Corporation of India) Act, 1990 is liable to pay Service Tax for broadcasting services. 32. Similarly under Clause 999.01 with regard to the sovereign/public duties/functions, it has been clarified that activities assigned to and performed by the sovereign/public authorities under the provisions of any law are statutory duties. The fee or amount collected as per the provisions of the relevant statute for performing such functions is in the nature of a compulsory levy and are deposited into the Government account. Such activities are purely in public interest and are undertaken as mandatory and statutory functions. These are not to be treated as services provided for a consideration. Therefore, such activities assigned to be performed by a sovereign/public authority under the provisions of any law, do not constitute taxable services. Any amount/fee collected in such cases are not to be treated as consideration .....

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..... acant land being comprehended within the expression renting of immovable property . However, clause (zzzz) has an exclusionary clause as well, enumerating the subjects excluded from the ambit of immovable property . Under this exclusionary dispensation; in sub-clause (a) vacant land solely used for agricultural, aquaculture. farming, forestry, animal husbandry, mining purposes; in sub-clause (b) vacant land, whether or not having facilities clearly incidental to the use of such vacant land; and in sub-clause (c) land used for educational, sports, circus, entertainment and parking purpose, are excluded from the purview of immovable property . On a true and fair construction of the exclusionary clause, the legislative intent is compelling that vacant land whether having facilities clearly incidental to its use as such or otherwise does not constitute immovable property. As a consequence of the interplay between the enumeration of renting of immovable property as the taxable event read with the inclusionary and exclusionary clauses (in particular sub-clause (b) of the exclusionary clause) in Section 65(105)(zzzz), renting of vacant land was clearly outside the purview of the taxable s .....

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..... t it can also provide for the retrospective operation of the said provisions. In case of Jyoti Traders [1999 (112) STC 277 (SC)] Hon ble Supreme Court stated- 26. The two decisions in the cases of The Ahmedabad Manufacturing & Calico Printing Co. Ltd. and Biswanath Jhunjhunwalla & Anr. are more closer to the issue involved in the present case before us. They laid down that it is the language of the provision that matters and when meaning is clear, it has to be given full effect. In both these cases this Court held that the proviso which amended the existing provision gave it retrospectivity. When the provision of law is explicit, it has to operate fully and there could not be any limits to its operation. This Court in Biswanath Jhunjhunwalla case said that if the language expressly so states or clearly implies, retrospectivity must be given to the provision. ……. Hon ble Supreme Court has in case of State of Karnataka & Others vs The Karnataka Pawn Broker Association [2018 (255) Taxmann 12 (SC)] held as follows; 22. On analysis of the aforesaid judgments it can be said that the Legislature has the power to enact validating laws including the power to amend .....

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..... ence to its value shall,- (i) in a case where the provision of service is for a consideration in money, be the gross amount charged by the service provider for such service provided or to be provided by him; (ii) in a case where the provision of service is for a consideration not wholly or partly consisting of money, be such amount in money, with the addition of service tax charged, is equivalent to the consideration; (iii) in a case where the provision of service is for a consideration which is not ascertainable, be the amount as may be determined in the prescribed manner. (2) Where the gross amount charged by a service provider, for the service provided or to be provided is inclusive of service tax payable, the value of such taxable service shall be such amount as, with the addition of tax payable, is equal to the gross amount charged. (3) The gross amount charged for the taxable service shall include any amount received towards the taxable service before, during or after provision of such service. (4) Subject to the provisions of sub-sections (1), (2) and (3), the value shall be determined in such manner as may be prescribed. Explanation.-For the purposes of this section,- (a) c .....

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..... hough the measure of the tax is furnished by the fares and freights it does not cease to be a tax on passengers and goods . The point was considered by this Court again in D.C. Gouse and Co. etc. v. State of Kerala & Anr. etc. - (1980) 1 S.C.R. 804, where reference was made to the measure adopted for the purpose of the levy of tax on buildings under the Kerala Building Tax Act. The Court examined the different modes available to the Legislature for measuring the levy, and upheld the action of the Legislature in linking the levy with the annual value of the building and prescribing a uniform formula for determining its capital value and for calculating the tax. In the course of its judgment, the Court cited with approval a passage from Seervai s Constitutional Law of India - Second Edition, Vol. 2 at page 1258. Another principle for reconciling apparently conflicting tax entries follows from the fact that a tax has two elements : the person, thing or activity on which the tax is imposed, and the amount of the tax. The amount may be measured in many ways; but decided cases establish a clear distinction between the subject-matter of a tax and the standard by which the amount of ta .....

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..... the other relevant circumstances. It is apparent, therefore, that when enacting a measure to serve as a standard for assessing the levy the Legislature need not contour it along lines which spell out the character of the levy itself. Viewed from this standpoint, it is not possible to accept the contention that because the levy of excise is a levy on goods manufactured or produced the value of an excisable article must be limited to the manufacturing cost plus the manufacturing profit. We are of opinion that a broader based standard of reference may be adopted for the purpose of determining the measure of the levy. Any standard which maintains a nexus with the essential character of the levy can be regarded as a valid basis for assessing the measure of the levy. In our opinion, the original Section 4 and the new Section 4 of the Central Excises and Salt Act satisfy this test. 14.Section 4 envisages a method of collecting tax at the point of the first sale effected by the manufacturer. Under the old Section 4(a), the value of the excisable article was deemed to be the wholesale cash price for which an article of the like kind and quality was sold, or was capable of being sold, at th .....

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..... constitute the taxable value. Consideration itself has been defined inclusively to include all the amount paid or payable for the taxable service provided or to be provided. Appellants contended that lease premium has been received by them against the Agreement to Lease and is prior to entering into lease deed with the lessee and hence should not be part of the taxable value. On perusal of the sample copy of Agreement to Lease , on page 2, it is stated as follows: Whereas (a) The Corporation is the New Town Development Authority declared for the area designated as a site for the new town of New Bombay by the Government of Maharashtra in exercise of its power under Sub Section (1) and (3A) of the Maharashtra Regional and Town Planning Act, 1966 (Maharashtra XXXVII of 1966 (herein after referred to as the said Act ) (b) The State Government is pursuant to Section 113(A) of the said Act, acquiring lands described therein and vesting such lands in the Corporation for development and disposal. (c) The Licensee has by his application dated 12/2/07 requested the Corporation to grant a lease of a piece of or parcel of land so acquired and vested in the Corporation of the State Government a .....

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..... to the lessee. This amount is received as consideration for leasing out the plot of land identified in the agreement and is nothing other than that. The consideration against this agreement is received in two parts, namely full premium (specified in the recitals) and the amount specified in para 7 of the agreement. Since both the amount are received as consideration toward the leasing of the said plot, it is in terms of Section 67 of Finance Act, 1994, part of the taxable value of the service provided or to be provided by the appellants under the category of Renting of Immovable Property . 5.4.6 The arguments advanced by the appellants are identical to those advance before the Hon ble Tripura High Court in case of Hobb Brewers [2016 (45) STR 60 (Tripura)] and were rejected by the High Court, stating as follows: 4. We are not at all inclined to even issue notice in the writ petition. A perusal of Section 65(90a) and Section 65(105)(zzzz) of the Finance Act, 1994 as quoted in the letter dated 23-11-2015 clearly shows that Renting of Immovable Property Service includes renting, letting, leasing, licensing or other similar arrangements amounts to providing service and under Section 65( .....

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..... cific provisions as per Section 67 of Finance Act, 1994 and also the decision of the Apex Court in case of Bombay Tyres International, and decision of Tripura High Court in case of Hobb Brewers, we do not find any merits in the submission of the appellants that amount collected as lease premium should not form the part of taxable value.. 5.5 Whether the activities undertaken by the appellant qualify to be service as defined by Section 65B(44) of Finance Act, 1994 with effect from 1st July 2012. 5.5.1 Appellants have contended that post 1st July 2012, the activity undertaken by do not qualify as service as defined by Section 65B(44) of the Finance Act, 1994 and hence cannot be subjected to service tax. Section 65B(44) of the Finance Act, 1994 with effect from 1st July 2012 is reproduced below: (44) "service" means any activity carried out by a person for another for consideration, and includes a declared service, but shall not include- (a) an activity which constitutes merely,- (i) a transfer of title in goods or immovable property, by way of sale, gift or in any other manner; or (ii) a transaction in money or actionable claim; (b) a provision of service by an employee to .....

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..... e assessee for the grant of the lease concerned. In Traders and Miners Ltd. v. Commissioner of Income Tax, Bihar and Orissa, [1955] 27 ITR p. 341 a case decided by a Division Bench of the Patna High Court, the assessee let on lease for 99 years a portion of a Zamindari acquired by it. The lease related to the surface right together with nine mica mines located in that area. The consideration for the lease was the payment of a 'salami' and a reserve rent per year. The Income-tax Officer determined the cost to the assessee of the mineral rights and after deducting this amount from the salami, he assessed the balance to tax as capital gains under Section 12-B of the said Act. It was held by the Patna High Court that the gains arising from the said transaction were rightly taxed. This decision has been cited without comment by Kanga and Palkhivala in their commentary on the Law of Income-tax (7th Edition) at page 550 and no contrary case has been cited in the said text book or has been brought to our attention. It is true that the decision of the Patna High Court relates to a case of mining lease, but to our mind, the principle laid down in that case can well be applied to the .....

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..... capital asset in section 45 of the Act includes grant of Mining Lease for any period .then obviously the "cost of acquisition" of the land would include the "cost of acquisition" Of the Mining right under the lease. Undisputedly the grant of a lease being a transfer of an asset there is no escape from the conclusion that there is a live nexus between the "cost of acquisition" of the land and the rights granted under the lease. The amount of ₹ 27,260 paid by the Assessee was not only the cost of acquiring the land but also of acquiring bundle of rights in the said land including the right to grant lease. There is, no force in the contention of the learned counsel that conceptually there is no "cost of acquisition" which is attributable to the right of limited enjoyment transferred by the grant of the lease. So far as the apportionment of the cost of acquisition is concerned it is a question of fact to be determined by the Income-Tax Officer in each case on the basis of evidence. The determination of the cost of the right to excavate clay in the land in terms of money may be difficult but is none-the-less of a money value and the best val .....

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..... ng not only land but also benefits to arise out of land. That is the immoveable property which can be the subject-matter of transfer, & if there is a contract to transfer immoveable property comprised within this inclusive definition, that would come well within the meaning of Section 53-A, T. P. Act. The benefit to arise out of land is an interest in land & therefore immoveable property. (Vide Sir Dinshah Mulla's commentary on Section 3, T. P. Act, p. 15.) Merely because in the definition of a lease contained in Section 105, T. P. Act, we do not find it specifically stated that a lease of immoveable property is a transfer of an interest in such property, but it is defined as a transfer of a right to enjoy such property, it does not follow that the transfer of the benefit to arise out of land, viz., the right to enjoy the immoveable property, is not a transfer of an interest in immoveable property. An interest in immoveable property can be acquired by a person not only if he has the totality of the rights in & over such property; he can also have an interest in immoveable property if he has transferred to him certain rights in or over the property which would come w .....

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..... nveyed only by a registered deed of conveyance. Transactions of the nature of GPA sales' or SA/GPA/will transfers' do not convey title and do not amount to transfer, nor can they be recognized or valid mode of transfer of immovable property. The courts will not treat such transactions as completed or concluded transfers or as conveyances as they neither convey title nor create any interest in an immovable property. They cannot be recognised as deeds of title, except to the limited extent of Section 53A of the TP Act. Such transactions cannot be relied upon or made the basis for mutations in municipal or revenue records. What is stated above will apply not only to deeds of conveyance in regard to freehold property but also to transfer of leasehold property. A lease can be validly transferred only under a registered assignment of lease. It is time that an end is put to the pernicious practice of SA/GPA/will transactions known as GPA sales. 5.5.8 Thus we are not in position to uphold the contentions of the appellant that by leasing of the land, there was an transfer in title of the immovable property so as to hold that the activities undertaken by the appellant will fall under .....

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..... ry in the public interest so to do, hereby exempts the following taxable services leviable thereon under section 66B of the said Act, namely:- 1-38 ……. 39. Services by a governmental authority by way of any activity in relation to any function entrusted to a municipality under article 243 W of the Constitution. 2. Definitions. - For the purpose of this notification, unless the context otherwise requires, - (s) "governmental authority'' means a board, or an authority or any other body established with 90% or more participation by way of equity or control by Government and set up by an Act of the Parliament or a State Legislature to carry out any function entrusted to a municipality under article 243W of the Constitution; 5.6.3 From the above extracts the issue that needs to be decided is whether the Appellants fall within the definition of government authority as defined by the notification. Appellants have contended that for the reason that they have been created under Section 113(3A) of MRTP they qualify to be the government authority. Section 113 of MRTP Act reads as follows: 113. Designation of site for new town:- (1) If the State Government is satisfi .....

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..... nd sue or be sued by such name as may be specified in the notification under subsection (2). (5) On the constitution of, or on the declaration of any corporation or company as a Development Authority or any new town, the local authority or authorities functioning, within the area designated under this Act as a site for the new town, immediately before such constitution or declaration shall cease to exercise the powers and perform the functions and duties which the said Development Authority is competent to exercise and perform under this Act. (6) The provisions of sections 5, 6, 7, 8, 9, 10 and 11 shall apply mutatis mutandis to a Development Authority constituted under sub-section (2) as they apply in relation to a Regional Board. (7) The Development Authority shall have its office at such place as the State Government may appoint in this behalf. (8) A Development Authority shall have all the powers and shall carry out all the duties of a Planning Authority under this Act including all powers and duties under Chapters III and IV and also under other provisions of this Act as may be relevant for carrying out of its objects and all the provisions in respect of procedure under this A .....

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..... as in case of Builders Association held as follows: 13. What is heavily relied upon before us is the position of CIDCO. The CIDCO relies upon a notification issued under the MRTP Act. It may be designated as a New Town Development Authority for the purpose of the MRTP Act. For designation of a site as a new town and for development of any area as a site for the new town, sub- section (3A) of Section 113 enables the State Government to require the work of developing and disposing of land in the area of new town by any such Corporation, company or subsidiary company as referred in sub-section (2) of Section 113 thereof. It could be declared, by a notification in a Official Gazette, to be the New Town Development Authority for that area. Pertinently, this notification, which is relied upon and which notifies the Navi Mumbai Disposal of Land (Amendment) Regulations, 2008 reinforces the position that by a final notification in Official Gazette, the CIDCO is constituted and designated as the New Town Development Authority. 14. On a plain reading of the GST Act, we do not see how we can agree with Mr. Nankani. Mr. Nankani also relies upon Schedule II, which is referable to Section 7. Thes .....

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..... ome Tax Officer is the issue of treatment to the installment paid towards the premium in the relevant accounting year. The Income Tax Officer treated this as a revenue receipt of the assessee. On appeal, this order was confirmed. On further appeal, the Tribunal also held that the premium was really the rent payable under the lease deed and, therefore, it was chargeable to income tax. After the matter was carried to the High Court, the assessee succeeded because the question posed for the High Court s consideration was answered by holding that this receipt is a capital receipt. The question that arose before the Hon ble Supreme Court was whether this finding is correct. It is in that context and how to treat this income, whether as a revenue receipt or a capital receipt that all the further observations are made. Even by terming the gain or income as Salami, what the Hon ble Supreme Court was essentially concerned with is not the transaction or the nature thereof, but the income generated or derived from it. Its treatment, therefore, led to the Hon ble Supreme Court referring to Section 105 of the Transfer of Property Act, 1882. In these circumstances, the opinion rendered is that t .....

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..... hri Ramtanu Cooperative Housing Society Ltd. (supra) is of no assistance. There, the constitutional validity of the Maharashtra Industrial Development Act, 1962 was challenged. The argument was that this is not an enactment and in pith and substance referable to the constitutional entry, namely, Schedule VI List I, Entries 7 and 52, List II Entry 24 within the meaning of Article 246 of the Constitution of India. It is in this context that the functions and powers of the Maharashtra Industrial Development Corporation (MIDC) were referred and the court came to the conclusion that the Corporation is not a Government company and cannot be termed as a trading corporation as well. It provides amenities and facilities in industrial areas, when it allots industrial plots for setting up industries so as to achieve a balanced development and growth of industries. It is performing that function and which, therefore, enabled the Hon ble Supreme Court to hold that the constitutional entries would not allow the power of competent legislature to make the law. This judgment is of no assistance. 18. In the case of Commissioner of Central Excise, Nashik (supra), the demand of service tax was in issu .....

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..... can the Government in exercise of its executive action be sued for its decision on political or policy matters. It is in public interest that for acts performed by the State either in its legislative or executive capacity it should not be answerable in torts. That would be illogical and impractical. It would be in conflict with even modem notions of sovereignty. One of the tests to determine if the legislative or executive function is sovereign in nature is whether the State is answerable for such actions in courts of law. For instance, acts such as defence of the country, raising armed forces and maintaining it, making peace or war, foreign affairs, power to acquire and retain territory, are functions which are indicative of external sovereignty and are political in nature. Therefore, they are not amenable to jurisdiction of ordinary civil court. No suit under Civil Procedure Code would lie in respect of it. The State is immune from being sued, as the jurisdiction of the courts in such matter is impliedly barred. 24. But there the immunity ends. No civilised system can permit an executive to play with the people of its country and claim that it is entitled to act in any manner as .....

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..... rder and repression of crime etc. which are among the primary and inalienable functions of a constitutional Government, the State cannot claim any immunity. The determination of vicarious liability of the State being linked with negligence of its officers, if they can be sued personally for which there is no dearth of authority and the law of misfeasance in discharge of public duty having marched ahead, there is no rationale for the proposition that even if the officer is liable the State cannot be sued. The liability of the officer personally was not doubted even in Viscount Canterbury (supra). But the Crown was held immune on doctrine of sovereign immunity. Since the doctrine has become outdated and sovereignty now vests in the people, the State cannot claim any immunity and if a suit is maintainable against the officer personally, then there is no reason to hold that it would not be maintainable against the State. 19. To the similar effect are the findings in the later judgment of the Hon ble Supreme Court in the case of Agricultural Produce Market Committee v. Ashok Hari Kuni - AIR 2000 SC 3116 (see Paras 22 and 31 to 33). 20. In the passing, we are of the opinion that the High .....

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..... Uttar Pradesh also to be heard, but no statement of case had been put in on behalf of that State, and as no grounds were made out for condoning the delay, we refused the application. The reference is in these terms "Whereas sub-section (1) of section 20 of the Sea Customs Act, 1878 (Act 8 of 1878), provides for the levy of customs duties on goods imported or exported by sea to the extent and in the manner specified in the said sub-section ; And whereas sub-section (2) of section 20 of the said Act applies the provisions of sub-section (1) of that section in respect of all goods belonging to the Government of a State and used for the purposes of a trade or business of any kind carried on by, or on behalf of, that Government, or of any operations connected with such trade or business as they apply in respect of goods not belonging to any Government; And whereas it is proposed to amend sub-section (2) of section 20 of the said Act so as to apply the provisions of sub-section (1) of that section in respect of all goods belonging to the Government of a State; 793 irrespective of whether such goods are used or not for the purposes set out in the said subsection (2) as at present in .....

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..... not extend to Union taxes in relation to the property of a State and that clauses (2) and (3) of that article have also to be construed accordingly; (ii) that customs duties are taxes on the import or export of property and not taxes on property as such and further that excise duties are taxes on the production or manufacture of property and not taxes on property as such; and (iii) that the union is not precluded by the provisions of article 289 of the Constitution of India from imposing or authorising the imposition of customs duties on the import or export of the property of a State and other Union taxes on the property of a State which are not taxes on property as such; And whereas doubts have arisen as to the true interpretation and scope of article 289 of the Constitution of India and, in particular, as to the constitutional validity of the amendments to the Sea Customs 795 Act. 1878 (Act 8 of 1878) and the Central Excises and Salt Act, 1944 (Act 1 of 1944) as proposed in the aforesaid draft Bill; And whereas in view of what has been hereinbefore stated, it appears to me that the questions of law hereinafter set out have arisen and are of such a nature and are of such public .....

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..... es of customs and excise which are in their essence trading taxes and not taxes on property. 36. It is also contended on behalf of the States that the narrower construction suggested on behalf of the Union would very seriously and adversely affect activities of the States. This argument does not take into account the more serious consequences that would follow if the wider interpretation suggested on behalf of the States were to be adopted. For example, a State may decide to embark upon trade and commerce with foreign countries on a large scale in respect of different commodities. On the interpretation put forward by the States, the Union Parliament would be powerless to regulate such trade and commerce by the use of the power of taxation conferred on it by entry 83 of List I, thus largely nullifying the exclusive power of Parliament to legislate in respect of international trade and commerce, including the power to tax such trade. Trade and commerce with foreign countries, export and import across the customs frontiers and inter-State trade and commerce are all within the exclusive jurisdiction of the Union Parliament. This Court naturally will not adopt a construction of Art. 289 .....

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..... ification in the Official Gazette, a Corporation by the name of Maharashtra Industrial Development Corporation. (2) The said Corporation shall be a body corporate with perpetual succession and a common seal, and may sue and be sued in its corporate name, and shall be competent to acquire, hold and dispose of property, both moveable and immoveable, and to contract, and do all things necessary for the purposes of this Act. The said corporation so established is collecting certain fees for various statutory functions assigned to it under the statue and these fees have been held to statutory levies not in respect of any particular service and hence not subjected to service tax. The difference in the constitution of the appellant from MIDC, makes the case of MIDC referred distinguishable. While MIDC being a statutory authority was collecting certain statutory fees, Appellants are not public/ statutory authorities on the same footing and were providing the taxable services as an agent of states. Hence the decision of tribunal and that of Bombay High Court in case of MIDC is distinguishable. 5.6.10 The arguments advanced by the Appellant have been considered by the tribunal in case of Chh .....

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..... ties (i.e. an agency constituted/set up by government) perform certain functions/duties, which are statutory in nature. These functions are performed in terms of specific responsibility assigned to them under the law in force. For examples, the Regional Reference Standards Laboratories (RRSL) undertake verification, approval and calibration of weighing and measuring instruments; the Regional Transport Officer (RTO) issues fitness certificate to the vehicles; the Directorate of Boilers inspects and issues certificate for boilers; or Explosive Department inspects and issues certificate for petroleum storage tank, LPG/CNG tank in terms of provisions of the relevant laws. Fee as prescribed is charged and the same is ultimately deposited into the Government Treasury. A doubt has arisen whether such activities provided by a sovereign/public authority required to be provided under a statute can be considered as provision of service for the purpose of levy of service tax. 2. The issue has been examined. The Board is of the view that the activities performed by the sovereign/public authorities under the provision of law are in the nature of statutory obligations which are to be fulfilled in .....

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..... endering the proposition that taxable service rendered by Govt./public authority as statutory mandate/obligation is exempt merely because it is so rendered by Govt./public authority totally devoid of any legal basis. Indeed, C.B.E. & C. Circular No. 192/62/2016-S.T., dated 13-4-2016 (at Srl. No. 5 of the table contained therein) clearly states that It is clarified that any activity undertaken by Government or a local authority against a consideration constitutes a service and the amount charged for performing such activities is liable to Service Tax. It is immaterial whether such activities are undertaken as a statutory or mandatory requirement under the law and irrespective of whether the amount charged for such service is laid down in a statute or not…. Thus, the CESTAT judgment in the case of Maharashtra Industrial Development Corporation (MIDC) v. CCE, Nasik (supra) does not have the strength to rescue the appellant. 5.7 Whether the extended period of limitation can be invoked in the facts and circumstances of this case for making the demand of service. 5.7.1 On the issue of limitation appellants have relied upon number of decisions of various authorities to argue th .....

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..... liberate and with intent to evade payment of appropriate Service Tax. 47. Requirement under law to file proper ST3 returns with full disclosure is not a mere procedural formality but a statutory requirement. Under the statute, the assessee was under an obligation to file ST-3 returns declaring therein the correct nature of services provided and correct value of services. Any failure to declare information required to be declared in statutory returns leading to non-payment of appropriate Service Tax thereon, has to be taken as Service Tax not paid by reason of suppression of facts. Therefore, each non-filing of ST-3 return or filing of ST-3 return without furnishing the information/data required to be declared under the aforestated columns, during the entire period covered by the Show Cause Notice dated 19.10.2012, amounts to repeated suppression of facts. 48. Section 73 ibid does not speak specifically about the knowledge gained by the Department. What is relevant for invoking the proviso clause to Section 73(1), as it stood at the material time, is whether the Service Tax which had not been levied, short levied, etc., and been so (not paid) by reason of fraud or collusion or wilfu .....

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..... submitted that Income Tax Department has accepted such treatment given by them. The fact remains that after definition of lending was amended, and the service tax definition included in the activity in relation to lending for liability to Service Tax, appellant should have intimated the fact to the Department and checked up whether such collection of amount in relation to lending would be liable to tax or not. It is settled law that Government company is not Government and it has to be taken note that even Government departments make the payments for the services received from another department. Telecommunication department used to provide telecommunication services to other departments and other departments paid for the telecom services rendered and even for the services rendered by Railways, Postal and other departments, payments are made. Therefore, the fact that the appellant is a wholly owned government company, does not mean that they need not have to follow the law of land or take it lightly and plead ignorance of law or being a wholly government company, seek differential treatment. The fact remains that the appellant was required to declare the income received once the l .....

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..... C and Indian Institute of Chemical Technology ( Supra). The facts involved in these cases are entirely different and distinguishable and hence, the decisions in these cases cannot be made applicable as it is to the instant case as those decisions have been rendered in the particular facts and circumstances of the cases so decided and cannot be made applicable universally. Further, the reliance place on the decisions in Hindalco Industries Ltd. And Franch Express Network (supra) is also totally misplaced, as the present case is not based on the Balance Sheet. Besides, in the case of HML Agencies (P) Ltd., P.J. Margo Pvt Ltd., PT Education & Training Service Ltd., Tirupati Paints, Delux Colour Lab Pvt. Ltd. and Yokogawa Blue Star, relied by the Noticee, either the facts were declared to the department in some or the other manner or the facts are entirely different and cannot be equated with the facts and circumstances of the present case. Therefore, even the ratio in these case cannot be applied. 52. Further, relying of the decisions in Bharat Aluminium Co. Ltd. and Homa Engineering(Supra), it is contended by the Noticee that in cases where dispute of interpretation of statute is .....

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..... 1944 tantamount to rewriting statutory provisions and not open to superior court/Tribunal either to add or substitute words in Statute. The provisions of Section 11A(1) of the Central Excise Act, 1944 are pari material to the provisions of Section 73(1) of the Finance Act, 1994, as they existed during the relevant period of time. Therefore, even the ratio of decisions if Institute of Chartered Fin. Analyst of India, Able Adds Pvt. Ltd. and Precious Publication Pvt. Ltd. (supra) relied by the Noticee, cannot be applied to the present case. 54. Even the claim of bonafide belief that the impugned services were not liable to tax is not acceptable as the basis of the bonafide belief is neither elaborated nor supported by the Noticee with evidence. Therefore, the ratio of the decision in the case of Firepro Systems (supra) cannot be applied to the instant case. 5.7.2 We do not find any reason to differ with the findings of the Commissioner as appellant had never disclosed the relevant facts to the department. Also they had failed to take registration and file the relevant ST-3 returns as required under law. Further we also agree with the Commissioner that there can be dispute in the mat .....

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..... d or has been short levied or short paid or erroneously refunded, the person, who is liable to pay duty as determined under sub-section (2) or has paid the duty under sub-section (2B) of Section 11A, shall in addition to the duty be liable to pay interest at such rate ........ The terminal part in the quotation above, which is couched with the words shall and be liable clearly indicates that there is no option. As discussed earlier, this is a civil liability of the assessee, who has retained the amount of public exchequer with himself and which ought to have gone in the pockets of the Central Government much earlier. Upon reading Section 11AB together with Sections 11A and 11AA, we are of firm view that interest on the duty evaded is payable and the same is compulsory and even though the evasion of duty is not mala fide or intentional. 5.8.2 Similar views have been expressed in the following decisions: a) Kanhai Ram Thakedar [2005 (185) ELT 3 (SC)] b) TCP Limited [2006 (1) STR 134 (T-Ahd)] c) Pepsi Cola Marketing Co [2007 (8) STR 246 (T-Ahd)] d) Ballarpur Industries Limited [2007 (5) STR 197 (TMum)] 5.8.3 Thus we uphold the demand of interest made under Section 75 of the Finance Ac .....

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..... im under the statue. Hon ble Supreme Court has in case of Gujarat Travancore Agency [1989 (42) ELT 350 (SC)] held as follows: 4. Learned Counsel for the assessee has addressed an exhaustive argument before us on the question whether a penalty imposed under Section 271(1)(a) of the Act involves the element of mens rea and in support of his submission that it does he has placed before us several cases decided by this Court and the High Courts in order to demonstrate that the proceedings by way of penalty under Section 271(1)(a) of the Act are quasi criminal in nature and that, therefore, the element of mens rea is a mandatory requirement before a penalty can be imposed under Section 271(1)(a). We are relieved of the necessity of referring to all those decisions. Indeed, many of them were considered by the High Court and are referred to in the judgment under appeal. It is sufficient for us to refer to Section 271(1)(a), which provides that a penalty may be imposed if the Income Tax Officer is satisfied that any person has without reasonable cause failed to furnish the return of total income, and to Section 276C which provides that if a person wilfully fails to furnish in due time the .....

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..... il obligations. A penalty imposed for a tax delinquency is a civil obligation, remedial and coercive in its nature, and is far different from the penalty for a crime or a fine or forfeiture provided as punishment for the violation of criminal or penal laws. 5.9.5 Penalty under Section 76 of the Act is imposed for failure to pay Service Tax by the due date. Kerala High Court has in case of Krishna Poduval {2006 (1) STR 185 (Ker)] held follows: 11. The penalty imposable under S. 76 is for failure to pay service tax by the person liable to pay the same in accordance with the provisions of S. 68 and the Rules made thereunder, whereas S. 78 relates to penalty for suppression of the value of taxable service. Of course these two offences may arise in the course of the same transaction, or from the same act of the person concerned. But we are of opinion that the incidents of imposition of penalty are distinct and separate and even if the offences are committed in the course of same transaction or arises out of the same act, the penalty is imposable for ingredients of both the offences. There can be a situation where even without suppressing value of taxable service, the person liable to pa .....

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..... ly, the appeal is dismissed. Tribunal has in case of Checkmate Industries Services [2016 (44) STR 290 (T-Mum)]] held as follows: 5.4 With regard to penalties imposed on the appellant, penalty under Section 76 is imposed for default in payment of tax and, no mensrea is required to be proved for imposing such penalty. For mere default and delay in payment of tax, the liability to penalty arises. The Hon ble High Court of Kerala in the case of Asst. Commissioner of Central Excise v. Krishna Poduval - 2006 (1) S.T.R. 185 (Ker.) has held that penalty under Section 76 of the Finance Act, 1994 can be imposed for mere default/delay in payment of Service Tax in addition to the penalty under Section 78 and these penalties are mutually exclusive and even if offences are committed in the course of same transaction or arise out of same act, penalty is imposable for ingredients of both offences. 5.9.6 By not filing the ST-3 returns in respect of the renting of Immovable Property Services as required under Section 70 of Finance Act, 1994 read with Rule 7 of Service Tax Rules, 1994, appellant have made themselves liable to penalty under Section 77 ibid. Hence the penalties imposed upon by the adju .....

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..... the newly introduced Section 104 of the Finance Act 1994 since the relevant objective, as found in the said resolution reads; with the growing support that the Central Government is giving to export oriented industries, the contemplated new town development in the above areas will not only provide relief to Bombay City but will also accelerate the promotion of industries in the State and open cut and speed up industrial development of the Konkan region. Decongestion of industrial and office concentration in Bombay has now become an urgent problem and the proposed development of the above new township, if undertaken quickly could save the situation even one from getting out of control,. The project is of such a character that it involves planning and development of all sectors including commerce, trade, housing, etc., to combine into a well-balanced and well planned township . (Underlined to emphasise) 5.11.3 Section 104 covers the period of dispute concerning the Appellant and the duty demand has not been confirmed since it has not attained finality and under litigation before this Forum. Therefore, in my consider view Service Tax demand on the Appellant on long term leasing of im .....

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..... remand within a period of four months from the date of receipt of this order. 6.5 Appeals No ST/88472/14 and ST/86274/15 filed against the demand notice are dismissed as infructuous. (Order pronounced in the open court on 05.08.2019) (Sanjiv Srivastava) Member (Technical) (Dr. Suvendu Kumar Pati) Member (Judicial) PER: SUVENDU KUMAR PATI 7. I have the occasion to go through the draft order prepared by my learned brother Shri Sanjiv Srivastava, Member (Technical) and I appreciate the reasoning and rationality of the order. However, I have got certain reservation in respect to the definition of leasing of immovable property that has been brought into the purview of renting of immovable property as defined in Section 65(90a) of the Finance Act, 1994 w.e.f. 01.06.2007. I also have reservation on imposition of tax by Central Government against lease of land by the State Government or its agency for which I consider it proper to record a difference of opinion on the findings of my learned brother. 8. To start with my views, I would like to reproduce entry No. 45 in list-II, contained in schedule 7 of the Constitution of India dealing with State list on which the State Government is alone .....

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..... States are interested is explained in Clause 2 are those in which the duty component is assigned to the States or payable to the States. With the above provision in mind, it is now required to examine the term leasing which is included within the definition of renting in Sec-65 90a of the Finance Act. 10. Section 105 of Transfer of Property Act defined the term lease of immoveable property and it says that it is a transfer of right to enjoy such property, may for a certain time which could extend to perpetuity even. Likewise Section 106 Clause 1 defines the duration of lease and says if there is no contract or local law or usage in force, lease of immovable property for agriculture or manufacturing process shall be deem to be a lease for year to year and for other purpose lease tenure is for month to month. In the appeal before us, the lease was admittedly given for 60 years with one time lease premium for the said 60 years payable in 2 to 3 instalments and lease rent to be calculated and collected yearly. Therefore, the lease rental which is determined on yearly basis should have been calculated for the purpose of Service Tax as defined under Section 65(105)(zzz) of the Finance A .....

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..... oration, company, subsidiary company aforesaid, as an agent of the State Govt., and thereupon, such corporation or company shall, in relation of such area, be declared by the State Govt., by notification in the official Gazette, to be the New Town Development Authority for that area. 13. Going by the resolution of Govt. of Maharashtra dt. 18th March 2017 (Annexure A), it can be found from para 2 of the said resolution that the acquired land shall be entrusted to the subsidiary company (Appellant) which would act as an Agent of the Govt. for the development of the area with a view to secure of the objective of its formation. Therefore, it is immaterial if provisions of section 5 to 11 which are applicable to development authority can also to applicable to the Appellant or not which is a Corporation of the State Govt. since it has been expressly declared under sub-section 3(A) to be equivalent with Govt. Authority. 14. To summarize my above discussion point-wise, I am of the considered view that firstly, land and its development as well as Management are State subjects on which union cannot impose tax-in whatever form except as per sub clause 2 of Article 289 which can only be done i .....

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