Land Sale Agreements Not Taxable as ‘Real Estate Agent’ Services: Supreme Court

The Supreme Court has held that land sale transactions executed through Memorandums of Understanding (MoUs) cannot be classified as taxable “real estate agent” services under the Finance Act, 1994, if they amount to outright transfer of property and not the rendering of any service. The bench of Justice J.B. Pardiwala and Justice Sandeep Mehta dismissed appeals filed by the Commissioner of Service Tax against a real estate firm, upholding a Customs, Excise and Service Tax Appellate Tribunal (CESTAT) order that had quashed a ₹10.45 crore tax demand. The case arose from agreements executed between a real estate firm based in Allahabad and Sahara India Commercial Corporation Ltd. (SICCL) for acquisition and development of land parcels in Sri Ganganagar (Rajasthan), Vadodara (Gujarat) and Kurukshetra (Haryana) between 2002 and 2005. Under the Memorandums of Understanding (MoUs), the developer identified, negotiated, and procured land parcels which were later registered directly in the name of SICCL. The Directorate General of Central Excise Intelligence (DGCEI) initiated an investigation alleging that the developer had acted as a “real estate agent” for Sahara India and had received substantial consideration without paying service tax. The Commissioner, Service Tax, New Delhi, in 2013 confirmed a demand of ₹10.45 crore, imposed equal penalty under Section 78 of the Finance Act, 1994, and levied additional fines for non-registration and non-filing of returns. However, on appeal, the CESTAT in June 2019 set aside the demand, holding that both parties had dealt as independent principals, and that the transactions were in the nature of sale and purchase of immovable property rather than service provision. The court while affirming the Tribunal’s order, ruled that the transactions did not constitute a “service” under Section 65(105)(v) read with Sections 65(88) and 65(89) of the Finance Act, 1994. The Court held that a “real estate agent” must necessarily be engaged in rendering services in relation to the sale, purchase, leasing or renting of real estate, either through advice, consultancy, or technical assistance. “The MoUs between the parties reflected a commercial arrangement for sale and transfer of land at a fixed rate per acre. There was no agency relationship, nor any element of service charges or consultancy fees,” the Court observed. The Bench emphasized that the developer bore the risk of profit or loss depending on the price negotiated with landowners, which distinguished the transaction from an agency or commission-based service. “The gains accruing to the respondent were contingent upon the difference between the price paid to the landowners and the fixed rate agreed upon with SICCL. The transactions thus amounted to transfer of title in immovable property, which is expressly excluded from the definition of ‘service’,” the judgment stated. The Supreme Court also rejected the Revenue’s invocation of the extended five-year limitation period under the proviso to Section 73(1) of the Finance Act, 1994. It held that the department had failed to prove deliberate suppression of facts or intent to evade tax. Referring to its recent ruling in Stemcyte India Therapeutics Pvt. Ltd. v. CCE & ST (2025), the Court reiterated that “mere non-payment of tax, without any element of intent or suppression, is not sufficient to attract the extended limitation period.” All transactions, the Court noted, had been routed through legitimate banking channels and duly recorded in the firm’s accounts. The Court clarified that transactions involving sale of land do not fall within the taxable ambit of “real estate agent” services. Risk-bearing and profit-loss mechanisms in such transactions indicate commercial trade rather than service provision. Extended limitation under service tax law cannot be invoked without evidence of willful suppression or intent to evade tax. Dismissing the appeals, the Bench concluded that the Tribunal’s findings were legally sound and free from infirmity, reaffirming that “plain and simple transactions of sale of land” are outside the purview of service tax. Case Details Case Title: Commissioner of Service Tax, New Delhi vs. M/s Elegant Developers Case No.: CIVIL APPEAL NO(S). 11744 – 11745 OF 2025 Date: 10/11/2025 Click Here To Read Order Read More: Cenvat Credit Can’t Be Availed On Invoices Dated After Surrender Of Registration: CESTAT

Land Sale Agreements Not Taxable as ‘Real Estate Agent’ Services: Supreme Court

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