Tax Liability Under JDA Arises Only Upon Conveyance Of Property, Not On Execution Of Agreement: Bombay High Court

The bench consists of Justices Bharati Dangre and Nivedita P. Mehta stated that no liability actually fell upon the assessee at the time when JDA was entered into, as the liability arises only upon the conveyance of the property. The assessee developer becoming the owner of the property for which the JDA was executed. Accordingly, the tax liability does not fall upon the assessee.

The assessee/petitioner is a company engaged in the business of real estate development. The assessee entered into a joint development agreement (JDA) for the construction of a residential project.

The Directorate General of GST Intelligence took up an investigation as regards the transaction involving the landowner and the assessee as the developer and insisted for payment of GST on the premise that it is due and payable on the construction service provided by the assessee to the landowner.

The assessee submitted that assuming that the notice is under Section 73, the time limit for issuance of notice was up to 30.09.2023, and the timeline for passing of the order could not have extended beyond 31.12.2023. If the notice is taken to be issued under Section 74, in that case, the maximum time period before which the notice is to be issued as on 07.08.2024, and in that case, the order is required to be passed should be not later than 07.02.2025.

The bench stated that in the wake of clear admission on the part of the respondents, the liability did not arise for the petitioner on the date on which the JDA was entered into i.e. 13.10.2017, since the Revenue is of the opinion that in the wake of the Notification of 2018, it shall now arise only at the time of the conveying the property upon its construction in the wake of the JDA, the initial stand adopted by the Revenue, deserved to be overlooked.

The bench opined that no liability actually fell upon the assessee at the time when JDA was entered into and in the wake of the subsequent Notification issued in 2018, with the clarification that the liability would fall upon the property which is conveyed and in the light of the sale deed, that the assessee developer becoming the owner of the property for which the JDA was entered into, the tax liability do not fall upon the assessee.

In view of the above, the bench directs the assessee to refund the amount of Rs. 7 crores with 6% interest within a period of six weeks.

Case Title: M/s Provident Housing Ltd. v. Union of India

Case Number: WRIT PETITION NO. 5 OF 2022

Counsel for Petitioner/Assessee: V. Raghuraman with Mr Bhanu Murthy and Gauravvardhan Nadkarni

Counsel for Respondent/Department: Asha Desai

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