Consult Us For Construction
Service Tax on Consideration paid by Flat buyers to builders
Service Tax - Section 65 (105)(zzzh) of the Finance Act, 1994 - clauses (zzzh) and (zzzzu) - leviability of service tax on consideration paid by flat buyers to a builder/promoter/developer for acquiring a flat in a complex, which under construction/development – service tax on preferential location charges – petitioner contention that the entries relating to taxation in List I and List II of the Seventh Schedule to the Constitution of India were mutually exclusive and the Parliament did not have the power to levy tax on immovable property; thus, the levy of service tax on agreements for purchase of flats was beyond the legislative competence of the Parliament
HELD - The use of a legal fiction is a well known legislative device to assume a state of facts (or a position in law) for the limited purpose for which the legal fiction enacted, that does not exist. The Parliament is fully competent to enact such legal fiction. In the present case the Parliament has done precisely that;
it has enacted a legal fiction, where a set of activities carried on by a builder for himself are deemed to be that on behalf of the buyer - The clear object of imposing the levy of service tax in relation to a construction of a complex is essentially to tax the aspect of services involved in construction of a complex the benefit of which is available to a prospective buyer who enters into an arrangement - whether by way of an agreement of sale or otherwise.