2025-VIL-750-CESTAT-DEL-ST
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SERVICE TAX CESTAT Cases

Service Tax – Taxability of transfer of development rights - Appellant received consideration under two separate agreements for Transfer of Development Rights - Department issued a show cause notice alleging that the consideration received was liable to service tax and invoked the extended period of limitation under section 73(1) of the Finance Act, 1994 - Whether the consideration received under the two agreements for transfer of development rights is leviable to service tax and the extended period of limitation could have been invoked in the present case - HELD - The consideration received under the two agreements was duly recorded in the balance sheets of the appellant for the financial years 2011-12 and 2012-13. The extended period of limitation could not have been invoked as there was no willful suppression of facts with intent to evade payment of service tax. The appellant had disclosed the receipt of consideration in its financial statements and it was a debatable issue whether transfer of development rights would be a transaction in immovable property or a service. Mere non-payment or non-disclosure does not amount to suppression of facts. For the extended period to be invoked, there has to be a deliberate and willful act to evade payment of tax, which was not present in this case – Further, the transfer of development rights under the two agreements does not amount to provision of a service as the developer was conferred the right to not only develop the project but also the right to sell the developed property along with the undivided interest in the land. This effectively amounts to transfer of ownership of the land, which is excluded from the definition of 'service' under section 65B(44) of the Finance Act. The Tribunal has held in various decisions that transfer of development rights is a transaction in immovable property and not a service, and the present case falls squarely within those decisions – The impugned order is set aside and the appeal is allowed - Whether the income shown under section 194(J) of the Income Tax Act is leviable to service tax - HELD - The amount received as income under section 194(J) of the Income Tax Act are within the yearly threshold exemption limit of Rs. 10 lakhs provided under Notification No. 33/2012-ST dated 20.06.2012. Therefore, these amounts cannot be subjected to service tax.
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