Transfer Of Approvals/Allotments Acquired From Government Involves Business Support Services, Attracts Service Tax: CESTAT

Dr. Rachna Gupta (Judicial Member) and P.V. Subba Rao (Technical Member) stated that the approvals and allotments so obtained are not 'profit a prendre' hence cannot be called as benefit arising out of immovable property. Assessees are rightly held to have rendered the Business Support Services to EIL/WWIL.

Both the assessee/appellants VWILLP and JNITPL are the companies floated by the parent company EIL/WWIL. Thus, the appellants admittedly are the part of same group companies of EIL/WWIL.

The appellants are engaged in the business of development of infrastructure facilities for setting up of Wind Energy Projects by acquiring, purchasing, selling or otherwise dealing in approvals/allotments for Wind Power Projects.

VWILLP was granted exclusive Rights under the State Government's Wind Power Policy through Government orders with respect to ear-marked areas for (a) development and (b) setting up of wind power projects.

The transaction under dispute is between the VWILLP and JNITPL with EIL/WWIL pursuant to the agreements dated 22.9.2010 and 11.03.2011 respectively which are Agreements for Transfer of Project Approvals and Allotments.

The amount of consideration for the said agreements is mentioned as “Purchase Consideration” in those agreements and is recorded as “Sale of Allotment/Approvals” in the financial statements of the appellants.

The appellants/assessee submitted that having obtained requisite “Governmental Approvals” and acquired Exclusive Right for the development of wind farms and power evacuation infrastructure, these approvals and allotments constitute the Development Rights which were actually transferred to EIL/WWIL on principal-to-principal basis without any agency relationship between the appellants and EIL/WWIL.

The Tribunal stated that the appellants agreements when read along with the said Valuation report it stands clear beyond all reasonable doubts that what has been transferred by the appellants under the said agreements to EIL/WWIL is not merely the approvals and allotments required to set up the wind farms but the whole set of underlying activities undertaken by the appellants to obtain those approvals and allotments.

The approvals and allotments so obtained are not 'profit a prendre' hence cannot be called as benefit arising out of immovable property. Appellants are rightly held to have rendered the Business Support Services to EIL/WWIL, added the Tribunal.

The bench observed that the transaction agreed by EIL/WWIL for its customers include the transaction undertaken by the appellants. This fact corroborates that the appellants had undertaken transactions on behalf of EIL/WWIL.

In view of the above, the Tribunal dismissed the appeal.

Case Title: M/s J.N. Investments & Trading Company Private Limited v. Additional Director General (Adjudication), New Delhi

Case Number: Service Tax Appeal No. 52875 of 2019

Counsel for Appellant/ Assessee: Aarya More

Counsel for Respondent/ Department: Mihir Ranjan

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