Section 65(30a): No Service tax on construction of residential units on undivided share of land for personal use of buyer

No ST on construction of residential units on undivided share of land as such units were for personal use of buyer

[2014] 49 taxmann.com 195 (Madras)

HIGH COURT OF MADRAS

Jain Housing

v.

Commissioner of Service Tax, Chennai

Section 65(30a) of the Finance Act, 1994 - Taxable services - Construction of Complex Services - Stay Order - Period from April, 2006 to June, 2010 - Assessee was engaged in development of residential projects whereby assessee used to enter into : (a) Memorandum of Agreement with intending purchaser for construction of a residential flat; and (b) Agreement of Sale for undivided share of land - Department argued that since land had been sold, subsequent construction amounted to service and was not a self-service - Assessee claimed that until actual sale after completion, service was self-service - On assessee's appeal, Tribunal ordered pre-deposit and dismissed appeal for default therein - HELD : Even if plea of Department about sale of land is accepted, it would mean that subsequent construction is for personal residential use of assessee, which is specifically excluded from scope of construction of complex services under section 65(91a), as clarified in Circular No.108/2/2009-S.T., dated 29.1.2009 - In view of strong prima facie case and also in view of financial hardship, as about 80% flats were still unsold, pre-deposit of balance dues was waived and appeal was restored on file of Tribunal [Paras 10 to 25] [In favour of assessee]

Note :  The relevant period is from April, 2006 to June, 2010.

In the e nature of the transaction entered into in the present case, there is no liability to pay service tax up to 1-7-2010. On and from 1-7-2010 the Explanation to section 65(105)(zzzh) of the Finance Act, 1994 makes the present transaction liable to service tax, which is not in issue in this case.