Joint development agreement with land owners to construct residential complex attracts Service Tax

- Construction of complex service -The Appellants argue that there is no relationship of service provider and service recipient between the Developer and the Land Owner. According to them it is a relationship in a joint venture for profit. Both the parties have joined together in the business of construction of complex and the land owner brings in the capital by way of his land. The Developer by way of his capital and services and they jointly construct the complex and use or sell the flats for profit. He argues that CBEC had clarified the position that no service arises in such context. This clarification dated 29-01-09 is examined later in this order.

On the contrary we find that the Joint Development agreement does not indicate any terms on the above lines. The parties were neither taking risks jointly or doing any common activity. There was no participation by the land Owners in organizing or carrying out the activity. The Joint Development Agreement as one in which the land owner transfers part of his rights in the land and gets the value of such rights transferred, in the form of constructed flats which consist of value of material used and services rendered by the Developer. After the Land Owner transfers a part of his rights through the agreement, his share of UDS is registered in his name and he is like any other prospective buyer for whom construction of complex is carried out under an agreement for construction of flats except that he has a guaranteed right to get his share of the number of flats constructed. We further examine the various issues raised in the light of this finding.