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(2024) 15 Centax 295 (Telangana)/2024 (83) G.S.T.L. 129 (Telangana) [09-02-

2024]

(2024) 15 Centax 295 (Telangana)

IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD
P. SAM KOSHY AND LAXMI NARAYANA ALISHETTY, JJ.
PRAHITHA CONTRUCTION PVT. LTD.
Versus
UNION OF INDIA
Writ Petition No. 5493 of 2020, decided on 9-2-2024

GST : Transfer of development rights of land by land owners to real estate

developer by way of a joint development agreement (JDA) would be subjected to
levy of GST.

Transfer of development rights of land - Transfer by owners to developer - Supply - Schedule III activities or
transactions neither supply of goods nor a supply of services - As per Joint Development Agreement (JDA) between
landowners and developer, there is no automatic transfer of ownership given to developer at time of execution of JDA -
Until completion of project takes place, developer does not get any right on said property and it is only after
completion of project and issuance of completion certificate, developer derives right to sell area of property which
stands allotted to him for realization of amount of money invested by him in course of execution of JDA - Thus, under
no circumstances can execution of JDA or mere transfer of development rights nor any of clauses of JDA indicate an
automatic transfer of ownership or title rights over any portion of land belonging to landowner in favour of developer -
No right, title and ownership is created in favour of developer - Thus, transfer of development rights to developer is
amenable to GST and cannot be brought within purview of Entry No. 5 of Schedule-III of GST Act - Notification No. 4
of 2018-Central Tax (Rate) imposing GST on transfer of development rights of land by land owners under a JDA is not
ultra vires Constitution of India [Section 7 of Central Goods and Services Tax Act, 2017/Telangana Goods and Services
Tax Act, 2017]. [paras 39 and 40]
In favour of revenue
CASES CITED
Rajasthan State Industrial Development and Investment Copn. v. Subhash Sindhi Co-operative Houring Society — [2013] 5 SCC 427 [Para
13]
CIT v. Balbir Singh Maini — [2017] 86 taxmann.com 94/251 Taxman 202 (SC) — Followed [Paras 35, 41]
Super Poly Fabriks Ltd. v. CCE — 2008 (10) S.T.R. 545(SC) — Followed [Paras 14, 38, 41).
Bhopal Sugar Industries Ltd. v. D. P. Dube, Sales Tax Officer — [1977] 3 SCC 147 - Distinguished [Paras 14, 38]
Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Ltd. — AIR 2016 SC 1285 - Distinguished [Paras 14, 38]
DLF Universal Ltd. v. Director, Town and Country Planning Department, Haryana — [2010] 14 SCC 1 - Distinguished [Paras 14, 38]
Safiya Bee v. Mohd. Vajahath Hussain — [2011] 2 SCC 94 - Distinguished [Paras 14, 38]
Pradeep Oil Corpn. v. Municipal Corporation of Delhi — [2011] 5 SCC 270 - Distinguished [Paras 14, 38]
Sadoday Builders (P.) Ltd. v. Joint Charity Commissioner — [2012] 1 AIR Bom R (NOC 35) 11 - Distinguished [Paras 14, 38]
Jindal Stainless Ltd. v. Union of India ILR — [2011] V1 Delhi 373 - Distinguished [Paras 14, 38]
State of T.N. v. P. Krishnamurthy — [2006] 4 SCC 517 - Distinguished [Paras 14, 38]
CIT v. B.C. Srinivas Setty — [1981] 2 SCC 460 - Distinguished [Paras 14, 38]
CCE & C v. Larsen & Turbo Ltd. — 2015 (39) S.T.R. 913 (SC) - Distinguished [Paras 14, 38]
Natural Resources Allocation In re — [2012] 10 SCC 1 - Distinguished [Paras 14, 38]
S.G. Jaisinghani v. Union of India — AIR 1967 SC 1427 - Distinguished [Paras 14, 38]
Patrick Bernardinz D'Sa, In re — [2018] 100 taxmann.com 208/[2019] 71 GST 379 (AAR - Kar.)/2019 (20) G.S.T.L. 181 (A.A.R GST) -
Distinguished [Paras 14, 38]
DEPARTMENTAL CLARIFICATION CITED
Circular No. 151/2/2012-ST, dated 10-2-2012
 NOTIFICATION CITED
Notification No. 4 of 2018-Central Tax (Rate), dated 30-9-2019
Notification No. 11/2017-Central Tax (Rate),dated 28-6-2017
Notification No. 5/2019-Central Tax (Rate), dated 29-3-2019
Notification No. 4/2018, dated 25-1-2018
Notification No. 23/2019-Central Tax (Rate), dated 30-9-2019

[Order per : P. Sam Koshy, J.].- The instant writ petition has been filed by the petitioner which is a company engaged in
the business of construction activities. The relief sought for in the instant writ petition is for a direction by way of a writ of
Mandamus declaring that the transfer of development rights of land by the land owners to the petitioner by way of a Joint
Development Agreement (for short 'JDA') should be treated as sale of land by the land owners and hence the execution of the
said agreement should not be subjected to levy of GST. That it should be covered under Entry 5 of Schedule III of Goods and
Services Tax Act, 2017 (for short 'GST Act, 2017') and the Telangana Goods and Services Tax Act, 2017 (for short 'TGST Act,
2017'). The incidental relief also sought for is issuance of a writ of Mandamus declaring the Notification No. 4 of 2018-
Central Tax (Rate) (Annexure P1) dated 30-9-2019 imposing GST on transfer of development rights of land by the land
owners under a JDA be ultra vires the Constitution of India.
2. Heard Sri S. Ravi, learned Senior Counsel for the petitioner and Sri Dominic Fernandes, learned Senior Standing
Counsel for CBIC appearing for the respondent-Department.
3. For better understanding of the dispute, it would be relevant at this juncture to briefly note the facts which led to filing
of the instant writ petition which are as under:
3.1 The petitioner M/s. Prahitha Constructions Private Limited had entered into a JDA with M/s. Jitvan Land Limited and
M/s. Janina Marine Properties Private Limited who are the land owners. The JDA was for development of the land belonging
to the land owner Nos.1 and 2 in the JDA admeasuring 8.30 acres forming part of plot Nos.9, 10A and 10B in Survey No. 83/1
situated at Hyderabad Knowledge City, Raidurg Village, Serilingampally Mandal, Ranga Reddy District, Telangana, and also
land admeasuring 1.82 acres forming part of plot No. 8B2 in Survey No. 83/1 situated at Hyderabad Knowledge City, Raidurg
Village, Serilingampally Mandal, Ranga Reddy District, Telangana. The two plots have to be developed as one composite
block which for convenience sake has been referred as "scheduled property" which stands marked as Annexure P1 in the JDA.
3.2 The petitioner is expert in the business of conceptualizing, planning, constructing and developing commercial real-
estate projects. The petitioner herein is the developer of the land belonging to M/s. Jitvan Land Limited and M/s. Janina
Marine Properties Private Limited by virtue of the JDA which was executed on 28-12-2017. By virtue of the said JDA, there
were certain conditions and agreements entered into between the parties. The petitioner had agreed for development of the
subject property by constructing three towers of the annexed building in the first phase with modern, common amenities and
facilities. The JDA was required to be executed within a given deadline period as per the terms. The provisions of the GST law
which came into force with effect from 1-1-2017 excludes levy of GST in respect of sale of land.
4. The petitioner herein is contending that the execution of JDA technically is almost like a sale of the land which was to
be developed by the petitioner. It is further contended that the respondents cannot compel the petitioner to pay GST by treating
the JDA and the consequences thereof as, not a sale transaction of the land. It was in this context that the petitioner intends to
assail the notification under challenge in the present writ petition.
5. According to the learned Senior Counsel for the petitioner, the transaction entered into between the petitioner and the
land owner can be safely brought within the purview of sale of land and pursuant to the JDA, the original land owner in fact
transferred the development rights of the subject property to the petitioner. Thereby, the said transfer of development rights
amounts to sale and the rights on the said property getting transferred upon the petitioner, the same should be exempted from
the levy of GST.
6. In the given factual backdrop, the issues which need to be deliberated upon and decided in the present writ petition are:
(a) Whether the transfer of development rights is in the nature of transfer of immovable property or the nature of
services would fall within the scope of GST?
(b) Whether the transfer of development rights can be safely brought within the purview of an outright sale of land?
7. Learned Senior Counsel for the petitioner agitated that the said impugned notification is ultra vires of Article 14, 246A
and 265 of the Constitution of India. Particularly, for the reason that the said notification does not prescribe any methodology
or offer of development rights. Thus, it becomes arbitrary and also unconstitutional. It was also contended that the said
notification has been issued without there being any logical reasons for issuance of the same. It is also irrational, unreasonable
and against the tenets of law. Therefore, it is liable to be quashed, stressing hard on the fact that the net result of execution of
the JDA is the sale of land belonging to the land owners to the so called developer after retaining part of the area which shall
be developed by the developer.
8. According to the learned Senior Counsel for the petitioner, it is the implication and the effect of execution of the JDA
which has to be considered as a whole, rather than taking note of only certain particular clauses. It was also contended that the
JDAs are normally entered enabling the land owners to sell the land and procure residential or commercial apartments in lieu
of such sale. That the land owners are given residential and commercial apartments corresponding to the value of the property
sold to the developers and the JDAs are to be viewed as conveyance as is expected in other laws.
9. It was the contention of the learned Senior Counsel that sale of land is one which is not taxable in terms of Schedule III
Entry 5 of the GST Act. By virtue of the execution of the JDA itself there is a substantive transfer of development rights of
property in favour of the petitioner which results in sale of land proportionate to the amount of investment made by the
developer and hence, there is a statutory embargo on the levy of tax as the execution of JDA gives rise to an element of sale of
land.
10. It was the further contention of the learned Senior Counsel that transfer of development rights to a developer or the
transfer of construction services against consideration in the form of transfer of development rights has been made amenable to
GST by virtue of the impugned notification dated 30-9-2019.
11. It was also the contention of the learned Senior Counsel that the said notification would not be tenable in the eye of
law for the reason that levy of tax would not be made permissible by way of issuance of a notification and the same would also
be unconstitutional. The notification under challenge dated 30-9-2019 cannot be brought within the purview of a delegated
legislation and if at all it is a delegated legislation, it has to be one which has been issued within the four corners of the statute
which in the instant case is silent. Hence, according to the learned Senior Counsel, the respondents have travelled beyond the
four corners of the GST law. Thus, have exceeded its jurisdiction with issuance of the said notification.
12. It was the contention of the learned Senior Counsel that taxing areas under the GST law cannot be expanded only by
way of issuance of a notification. In addition, there is no specific mechanism or machinery which determines the quantum of
tax liability upon the transfer of development rights and there is no specific provision under the GST law which determines the
rate at which tax has to be levied on a JDA pertaining to transfer of development rights.
13. It was the further contention of the learned Senior Counsel for the petitioner that the impugned notification would
amount of it being a delegated legislation and the delegated legislation cannot travel beyond the scope of substantive law. The
learned Senior Counsel relied upon the judgments of the Hon'ble Supreme Court in the case of Rajasthan State Industrial
Development and Investment Copn. v. Subhash Sindhi Co-operative Houring Society [2013] 5 SCC 427. Likewise, the
authorities concerned cannot impose levy of tax by way of a notification. It was further contended that the notification seems
to have been issued invoking the provisions of Section 148 of the CGST Act, 2017, and TGST Act, 2017. However, Section
148 does not confer either upon the respondent No. 1 or the respondent No. 2 the power to levy GST.
14. In support of his contentions, learned Senior Counsel for the petitioner further relied upon the following decisions:
(i.) Super Poly Fabriks Ltd. v. CCE 2008 (10) S.T.R. 545 (SC)
(ii.) Bhopal Sugar Industries Ltd. v. D.P. Dube, Sales Tax Officer [1977] 3 SCC 147
(iii.) Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Ltd. AIR 2016 SC 1285
(iv.) DLF Universal Ltd. v. Director, Town and Country Planning Department, Haryana [2010] 14 SCC 1
(v.) Safiya Bee v. Mohd. Vajahath Hussain [2011] 2 SCC 94
(vi.) Pradeep Oil Corpn. v. Municipal Corporation of Delhi [2011] 5 SCC 270
(vii.) Sadoday Builders (P.) Ltd. v. Joint Charity Commissioner [2012] 1 AIR Bom R (NOC 35) 11
(viii.) Jindal Stainless Ltd. v. Union of India ILR [2011] V1 Delhi 373
(ix.) State of T.N. v. P. Krishnamurthy [2006] 4 SCC 517
(x.) CIT v. B.C. Srinivas Setty [1981] 2 SCC 460
(xi.) CCE & C v. Larsen & Turbo Ltd. 2015 (39) S.T.R. 913 (SC)
(xii.) Natural Resources Allocation In re [2012 ] 10 SCC 1
(xiii.) S.G. Jaisinghani v. Union of India AIR 1967 SC 1427
(xiv.) Patrick Bernardinz D'Sa, In re 2019 (20) G.S.T.L. 181 (A.A.R GST)/[2018] 100 taxmann.com 208/[2019] 71
GST 379 (AAR - Kar.)
15. Per contra, learned Senior Standing Counsel for the respondent-Department in turn contended that the writ petition
filed by the petitioner being totally perverse deserves to be dismissed inlimine as there is hardly any substance on the part of
the petitioner for assailing the impugned notification. Learned counsel for the respondent-Department contended the fact that
the provisions of GST law excludes levy of GST upon the sale of land.
16. It was the contention of the learned Senior Standing Counsel for the respondent-Department that the only ground of
challenge to the notification is trying to bring the execution of JDA within the purview of an outright sale of land so as to
exclude it from the coverage of GST.
17. Learned Senior Standing Counsel for the respondent-Department strongly contended that in order to reach to a
conclusion whether the JDA would amount to an outright sale of land or it is only a transfer of development rights alone, it
would be necessary to take into consideration certain clauses of JDA itself.
18. Some of the relevant clauses of the JDA necessary for understanding the issue involved in the instant case are
reproduced herein under:
"A. Landowner I is the sole and absolute owner of the non-agricultural land admeasuring 8.3 0 (eight point three zero)
acres forming part of Plot Nos. 9, 10A and 10B and comprised in Survey No. 83/1, all situated at Hyderabad Knowledge
City, Raiduty Village, Serilingampally Mandal, R.R. District, Telangana State, the details of which are morefully
described in Part A of the First Schedule hereinunder written and hereinafter referred to as "Portion I".
B. Landowner II is the sole and absolute owner of the non-agricultural land admeasuring 1.82 (one point eight two) acres
forming part of Plot No. 8B2 and comprised in Survey No. 8III/1, situated at Hyderabad Knowledge City, Raiduty
Village, Serilingampally Mandal, R.R. District, Telangana State, the details of which are morefully described in Part B of
the First Schedule hereinunder written and hereinafter referred to as "Portion II".
D. The Developer is having expertise in the business of conceptualizing, planning, constructing and developing
commercial real estate projects. The Landowners have approached the Developer with a view to engage its services for
developing the Schedule Property as an IT/ITES and/or commercial office project in accordance with the terms of this
Agreement.
E. After undertaking due diligence in respect of the Landowners title for their respective portions in the Schedule
Property, for which the Landowners furnished the Developer all documents and complete information available with the
Landowners limited to that as set out in the list annexed hereto and marked as Annexure II, and also relying on the
representations, warranties and covenants provided by the Landowners as here-in-after set out in this Agreement, the
Developer has expressed its willingness to provide expertise and services towards developing the Schedule Property.
F. The Parties are desirous to record the mutually agreed and clearly defined roles and responsibilities to develop the
Schedule Property.
2.2 In consideration of the Developer performing terms of this Agreement, in pursuance of the foregoing, the terms and
conditions hereinafter contained and subject to the mutual obligations undertaken by the Parties under this Agreement,
the Landowners hereby irrevocably permit, grant and authorize the Developer, its agents, servants, associates and any
person claiming through or under it, the exclusive right to enter upon the Schedule Property on and from the Effective
Date only for the purpose of developing the Schedule Property subject to the terms of this Agreement.
2.3 Simultaneous with the execution of this Agreement, the Landowners have put the Developer in permissive
possession of the Schedule Property in pursuance of clause 2.2 above. The Landowners have granted such permissive
possession and authority to develop, to the Developer, in pursuance of the terms of this Agreement and such permissive
possession and authority to develop is one coupled with interest since the Developer will be incurring infrastructural
costs and expenditure towards development of the Project including but not limited to costs for obtaining the Approvals.
2.4 The Parties agree that nothing contained in clause 2.3 above shall be construed as delivery of possession in part
performance of any agreement to sell under section 53-A of the Transfer of Property Act, 1882 and/or Section 2(47) of
the Income-tax Act, 1961.
2.5 (a) The Developer shall be entitled to engage architects, engineers, contractors and other agencies, to mobilize work
force (collective "Vendors") necessary, as the Developer deems fit for execution and achieving Project Completion.
Under no circumstances shall it be construed that the Landowners have any privity of contact with such Vendors. In the
event of disputes/claims by such Vendors from time to time, such disputes/claims shall not be the liability of the
Landowners under any circumstances.
5.3 The Developer shall achieve Project Completion within 48 (forty eight) months commencing from the Project
Commencement (such 48 (forty eight) months being hereinafter referred to as "Deadline Date"). The Parties further
agree that, the Developer shall be entitled for a grace period of 6 (six) months commencing from the Deadline Date
without the Developer being liable to the Landowners for any penalties or damages i.e. 54 (fifty four) months from the
Project Commencement Date (such (fifty four) months from the Project Commencement Date (such 54 (fifty four)
months being hereinafter referred to as "Default Deadline Date").
6.1 In consideration of the Developer agreeing to construct, develop and deliver to the Landowners the Landowners
share, the Developer shall be entitled to construct, develop and absolutely own the Developer Share and receive
conveyance of the Developer UDS as set out in this Agreement. Notwithstanding the Developer being in possession of
the Schedule Property in accordance with clause 2.2 above, the Landowners Share shall be delivered by the Developer
on the Delivery Date contemporaneous with which the Landowners shall transfer and convey to the Developer and/or its
nominee/s, the Developer UDS proportionate to such Developer Share for which Completion has been achieved subject
to terms of this Agreement.
6.5 The Parties agree that the Landowners Chargeable Area shall be handed over to the Landowners in the following
manner:
6.5.1 Land Owner I shall be handed over 82.2 % (eighty two point zero two percent) [i.e. 8,25,079 (eight lakh twenty
five thousand seventy nine) square feet assuming Landowners Chargeable Area being 10,06,000 (ten lakh six thousand)
square feet] of the Landowners Chargeable Area as may be mutually agreed and demarcated at the time of finalization of
the Sanction Plan and further accurately identified in the Allocation Agreement.
6.5.2 Land Owner II shall be handed over 17.98 % (seventeen point nine eight percent) [i.e. 1,80,921 (one lakh eighty
thousand nine hundred twenty one) square feet assuming Landowners Chargeable Area being 10,06,000 (ten lakh six
thousand) square feet] of the Landowners Chargeable Area as may be mutually agreed and demarcated at the time of
finalization of the Sanction Plan and further accurately identified in the Allocation Agreement.
23.4 Any Force Majeure event pursuant to clause 23.2 shall extent the Approvals Deadline, but shall not in the aggregate
be in excess of 12(twelve) months beyond the Approvals Deadline ("Long Shop Date"). Further, in the event such Force
Majeure events result in extension of the Approvals Deadline beyond Long Stop Date, the Parties agree that the
Landowners shall have the right but not the obligation (which will be exercised by way of a notice in writing to be issued
to the Developer no later than 15 (fifteen) Business Days from the Long Stop Date: to terminate this Agreement. Upon
exercise of such right to terminate by the Landowners, this Agreement shall then stand terminated and each of the Parties
shall stand released from all of their rights and obligations under this Agreement against the Landowners: (i) reimbursing
the Developer in full all the actual costs, out in Annexure VIII upon the Developer providing the documentary proof
towards such costs and expenses, and (ii) refund of the entire Security Deposit. Immediately upon such termination and
 upon payment of such costs and expenses and refund of Security Deposit, the Developer shall cease to be in permissive
possession and the license to Developer in respect of the Schedule Property shall stand cancelled."
19. Referring to the aforesaid clauses of the JDA, learned Senior Standing Counsel for the respondent-Department
strongly contended that upon reading of the clauses of the JDA, particularly the clauses which are reproduced in the preceding
paragraphs, it gives a clear indication that there is no outright sale of property in the name of the developer. Rather, it is a case
where the conditions would clearly indicate that the ownership, the title rights are all retained by the land owner himself and
the only role which the developer has is the execution of JDA so far as developing of land belonging to the land owner is
concerned.
20. The further contention of the learned Senior Standing Counsel for the respondent-Department is that the bar on levy
of tax on sale of land admittedly is one which is given in Entry 5 of Schedule III of the GST law. Further, in the instant case
according to the learned Senior Standing counsel for the respondent-Department, there is no specific sale of land belonging to
the owner reflected. That the so-called impugned notification dated 30-9-2019 issued by the GST Council is one which has
been conferred with enormous powers as would be evident from Article 279A of the Constitution of India.
21. Referring to various clauses of the JDA, the learned Senior Standing Counsel for the respondent-Department pointed
out that clause 5.3, 6.6, 12.1 and 12.4 so also the clause 18.1 and 23.4 all of which deal with the timelines, manner and
procedure to be adopted by the developer in the course of execution of the JDA. These clauses would also reflect the nature of
powers to be exercised by the developer in the course of execution of the JDA and with conditions and restrictions clearly
spelt out, including that of force major, the timelines within which it has to be completed and on completion, handing over of
the developed property to the landowners and other incidental clauses pertaining to the different activities to be undertaken by
the developer. None of these clauses, according to the learned Senior Standing Counsel for the respondent-Department would
clearly reflect that only by way of the petitioner undertaking to develop the property of the landowner in terms of the JDA
would amount to an outright sale of land by the landowner to the petitioner.
22. It would be relevant to take note of clause 6.7 of the JDA which reads as under:
"6.7 The Parties have agreed that upon achieving Project-Phase I including but not limited to the handover of
Landowner's Share (including but not limited to the handing over of possession of the Landowners UDS) to the
Landowners on Delivery Date, the Developer shall be entitled to seek in its favour or in favour or any of its nominee(s)
(subject to the terms of this Agreement), a conveyance (in the form of sale) from the Landowners of the Developer UDS
in proportion to the completed Tower and Annex Building in the Project which is attributable to the Developer Share as
per the Allocation Agreement. The Parties have further agreed that upon Project Completion, the Developer shall be
entitled to seek and receive in its favour and/or in favour of any of its nominee(s) (subject to the terms of this
Agreement), a conveyance (in the form of sale) from the Landowners of the remaining proportionate Developer UDS. It
is clarified that in the event Completion of all 3 (three) Towers in the Project is achieved contemporaneously, then the
Developer shall be entitled to receive conveyance (in the form of sale) of the entire Developer UDS. For the purposes of
receiving sale of the Developer UDS in accordance with this clause 6.7, the Developer shall be entitled to execute all
relevant deeds and documents including sale deeds, conveyance deed etc. on behalf of the Landowners and admit
execution thereof for purposes of registration before the jurisdictional Sub-Registrar of Assurances by using the
authorization provided by the Landowners in terms of clause 17 herein. Further, at the request of the Developer, the
Landowners shall furnish certificate from its statutory auditor confirming that the Developer UDS is classified as stock
in trade in its current financials and that there are no pending proceedings or liabilities in terms of Section 281 of the
Income-tax Act, 1961 affecting the Landowners, prior to conveyance by sale of the Developer UDS or any part thereof in
accordance with this Clause."
23. Reading of the aforesaid clause further gives a clear picture of the fact that mere execution of JDA by itself would not
mean that the right, title and ownership of the property or a portion of that property stands transferred in the name of the
petitioner/developer. There are certain conditions/milestones/stages which have to be crossed before which the petitioner
would be entitled to have a certain element of right over the completed constructed area which has been agreed to be left at the
disposal of the petitioner. But that does not mean that mere execution of the JDA would amount to transfer of right to the
petitioner.
24. What needs to be primarily considered and decided in the instant writ petition is whether the transfer of development
rights of the immovable property of the landowners can be brought within the scope of GST. Reading of the clauses of JDA
reproduced in the preceding paragraphs would by itself reflect that the landowners have bundle of rights attached to his
immovable property. One of the rights is that of getting the property developed by engaging an agency of his choice, on his
terms and in the manner he deems fit.
25. There is no quarrel so far as the ownership, title and possession of the subject property being vested with the
landowners. There is also no dispute so far as the petitioner being engaged as an agency by the landowners for the purpose of
developing their property into a commercial complex. For the purpose of undertaking the construction and development of the
land belonging to the landowners, the petitioners and the landowners have entered into a JDA cum power of attorney. By
virtue of the JDA, the petitioner would have the permission/license to enter into the subject property of the landowners for the
purpose of undertaking and execution of the development activities on the said property. In terms of the JDA, upon the
petitioner developing the entire property, the landowners would be granting a share in the land proportionate to the built-up
area for which the petitioner is entitled towards consideration for the development.
26. As per the terms of the JDA, it also has a clause which deals with a situation of any default on the part of the
petitioner in not timely completing the project or any other conditions stipulated or breach of any of the conditions referred to
in the said JDA. There is also a condition of cancelling the contract agreement and under such situation; the entire rights over
the said property would continue to remain with the landowners. This again would show that the right and title of the property
even as on date stands vested with the landowners and not with the petitioner.
27. Clauses 6.1 and 6.7 of JDA further envisages that after the development, later on when the developer/petitioner hands
over the completed units to the landowners, the landowners and the developer will then enter into a conveyance deed whereby
the landowners will execute a sale deed to transfer the undivided share of land which would fall to the share of the petitioner
towards the investment, efforts, cost of construction and expenses incurred by the petitioner in the course of developing that
entire property. Thus, it is evident that the petitioner is offering construction services to the landowners in exchange for the
landowners transferring the development rights to the petitioner. Only on account of the development rights thus the petitioner
gets the right to enter into the land to undertake construction over the said property.
28. The contention of the learned Senior Counsel for the petitioner that the JDA eventually results in sale of land to the
petitioner is incorrect and misleading. It is only by way of a separate conveyance deed, that too, after the completion of the
development activity, the undivided share of land to the extent the petitioner is entitled, could be transferred and not solely by
virtue of the JDA, thus, the execution of the JDA between the two parties by itself would not amount to result in transfer of
ownership. The transfer of development rights is hence a service under GST Law which the landowner is offering to the
developer and that too for a consideration. Thus, the transfer of development rights is a service and not an outright sale of an
immovable property.
29. From plain reading of the JDA that was entered into between the two parties, what is apparently visible is that, there
was no outright sale of land being effectuated and the JDA per se cannot be considered merely as a medium adopted by the
landowner selling his land and the JDA does not lead to sale of land by itself. After the entire development activities are
carried out for the investment made by the petitioner for realizing what he has invested, he would be permitted to sell/dispose
of certain developed properties constructed in execution of the JDA. In the said circumstances, the petitioner though has a
right to realize the money from the sale of developed property, but the eventual transfer of developed/constructed property
including undivided share of land in favour of the purchaser of the constructed property will happen only after transfer of
undivided share of land by the landowner by way of sale deed. It is pertinent to refer the clause-2.4, by which, the parties agree
that execution of JDA and permissive possession of the developer shall not be construed as delivery of possession in part
performance of any agreement to sell under section 53-A of the Transfer of Property Act, 1882. It is also relevant to mention
that clause 6.1, by which , parties have agreed that the landowners shall transfer and convey to the developer and/or its
nominee(s), the developer UDS proportionate to such developer share for which completion has been achieved subject to
terms of this agreement contemporaneous with the delivery of the landowners share by the developer.
30. The transfer of ownership from the landowner goes directly to the purchaser of the constructed property and not in
favour of the petitioner unless and until the land stands transferred in the name of the petitioner. The same cannot be brought
within the ambit of sale. Transferring of the development rights does not result in transfer of ownership rights. That the sale of
land/transfer of land or undivided share of land would get executed only after issuance of completion certificate of the project.
This itself would give a clear indication that the services rendered by the petitioner in execution of JDA was supplied prior to
the issuance of completion certificate and would thus be amenable to GST.
31. The reliance of the circular dated 10-2-2012 i.e. Circular No. 151/2/2012-ST, may not be of any relevance for the
dispute in the present writ petition as the same was issued under service tax regime under which service tax was levied only on
those services which figured in the specified list of services and where sale of land by the landowner was held to be non-
taxable. This definitely does not also say that the transfer of development rights would also automatically become non-taxable.
32. As regards the contention of the learned Senior Counsel for the petitioner that Article 265 of the Constitution of India
prohibits imposition of tax otherwise that by authority of law, it has to be taken note of the fact that GST is levied under
Article 246A of the Constitution which empowers the Parliament and State Legislatures to make laws with respect to GST.
Section 9(1) of the CGST Act states that there shall be a tax levied called the 'central goods and services tax' on all intrastate
supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption on the value determined
under section 15 and at such rates not exceeding 20% as may be notified by the Government on the recommendations of the
Council and collected in such manner as may be prescribed and shall be paid by the taxable person. That the Government after
recommendation of the GST Council, had fixed the GST rates on supply of goods and services and thereafter GST on supply
of the said service is levied in accordance and with authority of law. It was in this context that the subsequent notification
dated 28-6-2017 i.e. Notification No. 11/2017-CT(R) was issued.
33. It is as per the GST Council recommendation that the liability to pay GST on supply of TDR shall be shifted to the
developer-promoter under reverse charge and was notified vide Notification No. 5/2019-CT(R) dated 29-3-2019. Under
reverse charge only the person required to deposit the tax and report it in return is changed. The eventual burden to bear the tax
remains the same i.e. the service recipient in this case the developer-promoter.
34. From plain reading of the JDA, what is reflected is that there are two sets of transactions to be met in its entirety. One
is agreement between the landowner and the petitioner and another is the supply of construction services by the petitioner to
the landowners and only thereafter sale of constructed area to third party buyers. Both these transactions qualify as supplies
made and would attract GST subject to clause (b) of paragraph 5 of Schedule II and both these supplies would fall under
section 7 of the GST Act i.e. construction services further read with Entry 5(b) of Schedule II. Under no circumstances can the
aforesaid two supplies can be termed as sale of land under Entry 5 of Schedule-III.
35. The Hon'ble Supreme Court in the case of CIT v. Balbir Singh Maini [2018] 12 Supreme Court Cases 354/[2017] 86
taxmann.com 94/251 Taxman 202 (SC) though dealing with the provisions of Income-tax Act, but under similar factual
backdrop in paragraph Nos.19, 25 and 26 had held as under:
 "19. A plain reading of the JDA shows that it is essentially an agreement to facilitate development of 21.2 acres so that
the developers build at their own cost, after obtaining necessary approvals, flats of a given size, some of which were then
to be handed over to the members of the Society. Payments were also to be made by the developer to each member in
addition to giving each member a certain number of flats depending upon the size of the member's plot that was handed
over. What is important to bear in mind is that payments under the third instalment were only to be made after the grant
of approvals and not otherwise, and that it is an admitted position that this was never done because no approvals could be
obtained as the High Court ultimately interdicted the project. Also, the termination clause is of great significance because
it shows that in the event of the JDA being terminated, whatever parcels of land have already been conveyed, will stand
conveyed, but that no other conveyances of the remaining land would take place.
25. The object of Section2(47)(vi) appears to be bring within the tax net a de facto transfer of any immovable property.
The expression "enabling the enjoyment of" takes colour from the earlier expression "transferring", so that it is clear that
any transformation which enables the enjoyment of immovable property must be enjoyment as a purported owner
thereof. The idea is to bring within the tax net, transactions, where, though title may not be transferred in law, there is, in
substance, a transfer of title in fact.
26. A reading of the JDA in the present case would show that the owner continues to be the owner throughout the
agreement, and has at no stage purported to transfer rights akin to ownership, and that too for a specific possession alone
is given under the agreement, and that too for a specific purpose—the purpose being to develop the property, as
envisaged by all the parties. We are, therefore, of the view that this clause will also not rope in the present transaction."
36. The Notification No. 4 of 2018 dated 25-1-2018 as amended by Notification No. 23/2019-Central Tax (Rate), dated
30-9-2019, on its plain reading would reveal that it is not with which there is a charge created on the transfer of development
rights, but in fact only provide for the time when the tax need to be paid. The very purpose of issuance of the said notification
appears to be ensuring ease for the landowners and developers as transfer of development rights happen at the time of
execution of JDA. However, handing over of the constructed area to the landowner happens at a later stage only on issuance of
the completion certificate of the project. In other words, the aforesaid notification deals with the time of supply of services of
transfer of development rights which was otherwise always taxable, since introduction of GST, has now been postponed to a
time when the petitioner transfers the possession of the constructed/developed area to the landowner.
37. The Hon'ble Supreme Court also in the case of Super Poly Fabriks Limited (supra) held as under:
"There cannot be any doubt whatsoever that a document has to read as a whole. The purport and object with which the
parties thereto entered into a contract ought to be ascertained only from the terms and conditions thereof. Neither the
nomenclature of the document nor any particular activity undertaken by the parties to the contract would be decisive."
38. As far as the various judgments cited by the learned Senior Counsel for the petitioner which are reflected in paragraph
No. 14, if we look into the facts of each of those judgments, it will be evidently clear that all those judgments were rendered
under an entirely different factual backdrop unconnected and unrelated to the issue involved in the present case. In view of the
same, without dealing with each of those cases separately, we are of the considered opinion that those judgments and the
principles laid down in those judgments cannot be made applicable in a straight jacket manner/formula to the facts of the
present case.
39. On conjoint reading of the clauses under JDA, clause d of the JDA along with clause 2.2, 2.3, 2.4, 6.1, 6.7 and 23.4
(all of which stands reproduced in the preceding paragraphs of this order) it will clearly indicate that there is no automatic
transfer of ownership given to the petitioner at the time of execution of the JDA. That until the completion of the project takes
place, the petitioner does not get any right on the said property and it is only after the completion of the project, issuance of
completion certificate, the petitioner derives the right to sell the area of property which stood allotted to him for the realization
of amount of money invested by him in the course of execution of the JDA. Thus, as has been held earlier, under no
circumstances can the execution of the JDA or the mere transfer of development rights nor any of the clauses of the JDA
indicate an automatic transfer of ownership or title rights over any portion of land belonging to the landowner in favour of the
petitioner/developer. In the absence of any cogent and substantial material to establish right, title and ownership being created
in favour of the petitioner/developer, the transfer of development rights as it stands is amenable to GST and cannot be brought
within the purview of Entry 5 of Schedule-III of the GST Act.
40. Taking into consideration the provisions of Article 246A of the Constitution of India and also considering the
extraordinary powers which have been conferred upon the GST Council and upon whose recommendation the Government
has issued the notification clarifying the aspect of transfer of development rights being attracted to GST/TGST, the challenge
to the notification issued by the Government of India can be safely held to be devoid of merits.
41. For all the aforesaid decisions and reasons, we are of the considered opinion that the grounds and contentions raised
by the petitioner in respect of the reliefs sought for is not sustainable and the writ petition sans merit and therefore deserves to
be and is accordingly, dismissed. No costs.
Consequently, miscellaneous petitions pending if any, shall stand closed.
SB