9911796707
TMI Blog2023 (7) TMI 570X X X X Extracts X X X X X X X X Extracts X X X X ..... rred to as "CECPL") is a private limited company engaged in the business of construction, development and maintenance of infrastructure. CECPL is the owner of property consisting of land and building situated in Thiruvalla, Kerala, India (hereinafter referred to as the 'Property'). 4. The applicant proposes to enter into a joint venture agreement with CECPL, with the intention to combine the individual expertise of the applicant and CECPL for the joint operation of an educational institution on the Property. 5. As per the proposed terms of the joint venture, each of the parties, i.e., the applicant and CECPL shall be individually responsible for areas within their expertise and shall be jointly responsible for the operation of the educational institution. The proposed terms of the joint venture are brief as follows: 5.1. The applicant shall be responsible for the academic operations of the educational institution and undertake the day-to-day administration and operation of the educational institution purely from an academic perspective. 5.2. CECPL would be responsible for the entire infrastructural requirements of the educational institution. 5.3. A four-member strategic commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The applicant requested an advance ruling on the following: 1. Vis-a-viz the applicant, who would be the recipient of service in the proposed joint venture? 2. Vis-a-viz Choice Estates and Constructions Private Limited, who would be the recipient of service in the proposed joint venture? 3. Whether the amount which would be paid by the students to the educational institution proposed to be jointly operated by the applicant and Choice Estates and Constructions Pvt Ltd by way of the proposed joint venture would be liable to GST? 4. Whether the applicant's share in revenue from the educational institution would be liable to GST? 5. Whether Choice Estates and Constructions Pvt Ltd.'s share in revenue from the educational institution would be liable to GST? 6. Whether the interest free refundable deposit proposed to be made by the applicant with Choice Estates and Constructions Private Ltd (CECPL) would be liable to GST? 8. Contentions of the Applicant: 8.1. Regarding questions 1 and 2, the applicant and CECPL propose to combine their individual areas of expertise in the form of a joint venture to jointly operate an educational institution in the Property for rendering of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed under Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. The relevant portion of the said notification is extracted below: SI. No. Chapter, Section, Heading, Group or Service Code (Tariff) Description of Services Rate (Per cent) Condition Heading 9992 or Heading 9963 Services provided - (a) by an educational institution to its students, faculty and staff; (aa) by an educational institution by way of conduct of entrance examination against consideration in the form of entrance fee; (b) to an educational institution, by way of,- (i) transportation of students, faculty and staff; (ii) catering, including any mid-day meals scheme sponsored by the Central Government, State Government or Union territory; (iii) security or cleaning or housekeeping services performed in such educational institution; (iv) services relating to admission to, or conduct of examination by, such institution; (v) supply of online educational journals or periodicals: Provided that nothing contained in sub-items (i), (ii) and (iii) of item (b) shall apply to an educational institution other than an institution providing services by way of pre-school education and education up t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction India Ltd. Vs Commissioner of CGST & Cex., Navi Mumbai [2021-VIL-507-CESTAT-MUM-ST] wherein under similar factual background, the Hon'ble CESTAT has held that where the parties have come together by way of a joint venture where each co-venture has their own set of responsibilities, the responsibilities discharged by each of them shall not be treated as service rendered to the joint venture liable to service tax. The relevant portion of the said ruling reads as follows: "33. It can safely be concluded that the Government of India with the appellant, RIL and ONGC had entered into a joint venture agreement, where under each co-venturer had its own set of obligations and the responsibility discharged by each of the co-venturers towards the venture was not by way of any service rendered to the joint venture, but in their own interest in the furtherance of the common objective of the joint venture. Service tax liability, therefore, could not have been fastened upon the appellant." 8.13. The applicant is therefore of the understanding that the share of revenue from joint operation of the educational institution shall not be liable to GST. 9. Comments of the Jurisdictional Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'Association of persons' or 'AOP' is to be discussed for a better comprehension. As per the Law Lexicon by P. Ramanatha Aiyer p.158, the term "AOP" has been defined as follows: - (i) An association of persons must be one in which two or more persons join in a common purpose or common action. 11.4.2. In the case of Commissioner of Income-Tax Vs C. Karunakaran and Ors. [1988] 170ITR 426, 429-430 (Ker.), It was held by the Honourable High Court of Kerala that wherever individuals employ their assets in a joint enterprise with a view to make profit, though not as partners, they constitute an association of persons by reason of their common purpose or common action. In such an enterprise, the distinction between a firm and an association of persons may often be thin and sometimes very obscure. 11.4.3. The Supreme Court in the matter of G Murugesan and Brothers [(1973) 4 Supreme Court Cases 211] has held that for forming an 'association of persons', the members of association must join together for the purpose of producing income. An 'association of persons' can be formed only when two or more individuals voluntarily combine together for a certain purpose. Hence, the Court held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tc may be members of such A.O.P. 11.6. From the submissions of the applicant, it is clear that the arrangement amongst the applicant and its counterpart are not independent of each other and they share the risk/revenue/profit/loss/liability of the other as a joint venture by joining hands for mutuality of interest and share common risk/profit together. 11.7. An unincorporated joint venture will exist only if the agreement entered into between the two independent persons is also recognized as a 'person'. Taking support from the General Clauses Act, it can be stated that 'person' includes an association or body of individuals, whether incorporated or not and accordingly concluded that an unincorporated association is also a person. Also, reliance can be placed on the judgment of Supreme Court in the matter of New Horizons 1995 SCC (1) 478, wherein it was held that 'joint venture' connotes a legal entity in nature of partnership engaged in joint undertaking of a particular transaction for mutual profit or an association of persons or companies jointly undertaking some commercial enterprise wherein all contribute assets and share risks. Further, reliance can be placed on Gammon India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that they offer their expert services and undertake the day-to-day administration and operation of the educational institution purely from an academic perspective which is going to be run and managed by the newborn JV. The moot point to be deliberated is whether the applicant is the 'Person' to whom the 'Project' is extended and the one providing the service. It is very clear that the project is executed by the 'Joint Venture. The applicant in its individual capacity is different from the JV, in which the applicant is a member. The 'project' is executed by the JV and not by the applicant. 12.2. As per Section 95(a) of the CGST Act read with Section 103 of the Act, the term 'advance ruling' means a decision provided by this authority to the applicant on matters or questions specified in sub-section (2) of Section 97, in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant and the ruling is applicable to only such person and the jurisdictional officer of such person. Thus, it is seen that only an applicant who satisfies the condition mentioned in Section 95 can apply for Advance Ruling. 12.3. From the submissions made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the recipient? What is being supplied and what is the consideration? 14. As per section 2(105) of the CGST/KSGST Act, 2017 "supplier" in relation to any goods or services or both, shall mean the person supplying the said goods or services or both and shall include an agent acting as such on behalf of such supplier in relation to the goods or services or both supplied. 15. As per Section 7 of the CGST/ KSGST Act, 2017, (1) For the purposes of this Act, the expression - "supply" includes- (a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; (aa) the activities or transactions, by a person, other than an individual, to its members or constituents or vice-versa, for cash, deferred payment or other valuable consideration. Explanation. -For the purposes of this clause, it is hereby clarified that, notwithstanding anything contained in any other law for the time being in force or any judgment, decree or order of any Court, tribunal or authority, the person and its! members or constituents shall be deemed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rson to another and hence it constitutes a supply under the CGST/KSGST Act, 2017. This service falls under the Heading 9983 Other professional, technical and business service - of scheme of classification of services and is taxable @ 18% (CGST-9% & SGST-9%) as per SI. No. 21 (ii) of the Notification No. 11/2017-Central Tax (Rate) dated 28 /06/ 2017 and S.R.O 370/2017 dated 30/06/2017 of Government of Kerala. 21. The sixth question; "whether the interest free refundable deposit proposed to be made by the applicant with Choice Estates and Constructions Private Ltd, (CECPL) would be liable to GST?" falls under the purview of clause (e) of sub section (2) of Section 97 of the CGST/KSGST Act, 2017, i.e., "determination of the liability to pay tax on any goods or services or both". 22. As per the applicant, considering that CECPL has made the entire initial investment towards the property and infrastructure of the educational institution proposed to be operated by the applicant and CECPL, the applicant shall towards such investment pay to CECPL an interest free refundable deposit of a mutually agreed fixed amount which shall be held by CECPL during the term of the proposed agreement. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the proposed agreement, whichever is earlier. Hence no monetary or other consideration is there for this deposit made. 27. The activities specified in Schedule I of the CGST / KSGST Act, 2017 is to be treated as supply even if made without consideration. As per Para (2) of Schedule I; Supply of goods or services or both between related persons or between distinct persons as specified in section 25, when made in the course or furtherance of business is to be treated as supply even when made without consideration. 28. As per explanation to sub-section (5) of Section 15 of the CGST/KSGST Act, 2017,- a) persons shall be deemed to be "related persons" if i. such persons are officers or directors of one another's businesses; ii. such persons are legally recognised partners in business; iii. such persons are employer and employee; iv. any person directly or indirectly owns, controls or holds twenty-five per cent, or more of the outstanding voting stock or shares of both of them; v. one of them directly or indirectly controls the other; vi. both of them are directly or indirectly controlled by a third person; vii. together they directly or indirectly control a third per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant'. Question 3. Whether the amount which would be paid by the students to the educational institution proposed to be jointly operated by the applicant and Choice Estates and Constructions Pvt. Ltd. by way of the proposed joint venture would be liable to GST ? Ruling No ruling can be given since the question is not in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant. Question 4. Whether the applicant's share in revenue from the educational institution would be liable to GST? Ruling Yes, the service supplied by the applicant to the educational institution i.e., the joint venture is liable to Goods and Services Tax as per Notification No. 11/2017-Central Tax (Rate) dated 28 /06/ 2017 and S.R.O 370/2017 dated 30/06/2017 of Government of Kerala. Question 5. Whether Choice Estates and Constructions Pvt. Ltd.'s share in revenue from the educational institution would be liable to GST? Ruling No ruling can be given since the question is not in relation to the supply of goods or services or both being u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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