Delhi HC restrains Hotelier Association from calling for ban on Oyo Rooms

The Delhi High court has restrained the Hotelier Welfare Association from issuing any notices to hoteliers and service providers calling for a ban on or seeking to boycott the hotel services provided by Oyo Rooms. The ex-parte interim injunction order was passed by a vacation Bench of Justice Jayant Nath in a suit by the owner of Oyo Rooms, Oravel Stays Private Limited (plaintiff) against the Hotelier Welfare Association (defendant). The Court was informed that the plaintiff is in the business of standardizing unbranded budget hotels, bed and breakfast and guesthouses through online and offline channels. It was further explained that the plaintiff enters into business arrangements with the service providers or hotelier, in which the service provider or hotelier permits the plaintiff to have full control over pricing, booking brought in by the hotel, publishing room tariffs on its website and/or mobile application at any point in time etc. It was the plaintiff's grievance that the defendant had been illegally conspiring and colluding with other similar hotelier associations such as Budget Hotel Association of Mumbai to coerce the plaintiff into submitting to their unwarranted, illegal demands. Pursuant to the various statements, notices/letters issued by the defendant, several hoteliers had expressed their apprehension in continuing their business-relation with the plaintiff, the Court was further informed. The Court also perused one such notice allegedly by defendant association, calling upon all hotels to support a nationwide protest against OYO by boycotting and blocking OYO rooms from June 20. The conduct, the plaintiff argued, had halted its business and could also potentially impact more than 1,35,000 bookings across India. It was also pointed out that the defendant was earlier the business partners of the plaintiff but have now formed an association and have been acting against the plaintiff. After hearing the plaintiff, the Court concluded that a prima facie case had been made out against the defendant for an ex parte injunction order. "It appears that the said act of the defendants is essentially pushing other hoteliers/service providers to act in breach of contract between the plaintiff and its service providers/hoteliers with whom the plaintiff has an appropriate agreement. Such an act prima facie would be illegal." The Court thus restrained the defendant from issuing notices or calling other hoteliers/service providers to boycott the plaintiff in any manner whatsoever till further orders. The defendants will also not press any such notice that may have been already issued, the Court added. Oyo Rooms was represented by Senior Advocate Neeraj Malhotra, briefed by a team of Advocates from IndusLaw Sandeep Grover, Mohit Chadha, Pankhuri Bhardwaj, Tarang Aggarwal, and Kshitij Parashar.

Landmark Judgement : Investment in Farm House is eligible for deduction under section 54 of Income Tax Act

Landmark Judgement : Investment in Farm House is eligible for deduction under section 54 of Income Tax Act Deduction – Capital Gain – Investment in FARM HOUSE is eligible for deduction under section 54 of Income Tax Act : The expression ‘residential house’ used in s. 54F has not been defined. The popular meaning of the word ‘house’ is a place or building used for habitation of man. “Residential house” is a dwelling house as distinct from a house of business, warehouse, office, shop, etc. In other words, residential house is a building used as place of abode in which people reside or dwell in contra-distinction to one which is used for commercial or business purposes. A farm house is also a residential house. Shyam Sunder Makhija Vs. ITO [38 ITD 125 (JAIPUR ITAT)] A farm house, according to the dictionary meaning, is a farmer’s house attached to a farm ACIT Vs. Om PrakashGoyal [ 53 SOT 158 (JAIPUR ITAT)] Benefit of s. 54F cannot be denied on ground that land on which construction was done was agricultural in nature–All the conditions for claiming exemption u/s. 54F have been found satisfied–It is established that assessee purchased a plot of land and then constructed a residential house on it–House constructed on agricultural land or on other land does not matter, but the fact that house should be constructed–Therefore, order of CIT (A) confirmed–Revenue’s appeal dismissed ITAT – Jaipur IN Ito, Jaipur vs Saroj Devi Agarwal, Jaipur on 5 October, 2017-ITA No. 397/JP/2016

GST registration required for a manufacturer of exempt supplies where he is liable to pay tax on reverse charge basis

Jalaram Feeds, In re – [2019] 106 taxmann.com 241 (AAR – MAHARASHTRA) The applicant-firm is a manufacturer of animal feed which is exempt under GST. Any other supply of goods or services which are taxable under GST are not undertaken by them. It is receiving the services of goods transport agency (GTA). It has filed an application for advance ruling to determine whether it is liable to obtain GST registration or not? The Authority for Advance Rulings, Maharashtra observed that as per the CGST Act, 2017, a person, who is engaged exclusively in the business of goods or services or both which are not liable to tax or wholly exempt, need not obtain GST registration. However, the provisions of compulsory registration in the CGST Act, 2017 which overrule the registration section, state that persons who are required to pay tax on reverse charge basis are mandatorily required to obtain mandatory GST registration. In this case, the applicant-firm is taking the services of GTA on which tax is required to be paid by the recipient on reverse charge basis under GST. Therefore, recipient is liable to pay GST on reverse charge basis in respect of GTA services. The Authority for Advance Rulings, Maharashtra held that GST registration is required by the applicant even though he is a manufacturer of exempt supplies as he is liable to pay tax on reverse charge basis.

AO couldn’t issue reassessment notice on second ground if notice issued on first ground was set-aside by HC : SC

AO couldn’t issue reassessment notice on second ground if notice issued on first ground was set-aside by HC : SC [2019] 106 taxmann.com 54 (SC) IT: SLP dismissed against High Court ruling that where High Court had already set aside reassessment proceedings for relevant assessment year on one issue, there was no warrant for issue of further notice under section 148 on another ground Section 147, read with section 32, of the Income-tax Act, 1961 – Income escaping assessment – Non-disclosure of primary facts (Second reassessment) – Assessment year 2005-06 – Assessee-company was engaged in business of manufacturing, trading and marketing of pesticides – For relevant year, assessee filed its return declaring certain taxable income – Assessment was completed under section 143(3) making certain additions – Subsequently, Assessing Officer reopened assessment and made additions on account of provision for diminution in value of assets and provision for doubtful debts – Tribunal set aside reassessment proceedings – High Court upheld order of Tribunal – Assessing Officer again initiated reassessment proceedings on ground that set off of unabsorbed depreciation against book profit was not in order – High Court by impugned order held that when High Court had already set aside reassessment proceedings for relevant assessment year, there was no warrant for issue of further notice under section 148 – Whether Special Leave Petition filed against impugned order was to be dismissed – Held, yes Rallis India Ltd

New Supreme Court Roster: Five senior-most judges to hear PILs

A new Supreme Court roster is set to be implemented from July 1, 2019, when the Supreme Court reopens after the summer break. A notable change brought about by the latest change in Bench portfolio is that the jurisdiction over Letter Petitions and Public Interest Litigation (PIL) has now been allocated to Benches headed by the five senior-most judges of the Supreme Court. When the roster system was introduced in February last year, then Chief Justice of India (CJI) Dipak Misra had allocated PIL matters to be exclusively heard by the CJI Bench. After CJI Ranjan Gogoi assumed office, he allocated a part of the PIL jurisdiction to the Bench headed by Justice (retired) Madan Lokur. As per the latest roster, however, PIL matters will now be heard by the Benches headed by CJI Gogoi and Justices SA Bobde, NV Ramana, Arun Mishra and RF Nariman. Justices Bobde, Ramana, Mishra and Nariman will hear PILs assigned to them by the CJI. Further, election matters, which were vested exclusively with the Bench headed by the CJI, will now be shared with the Bench headed by Justice Bobde. The CJI's roster subjects largely remains unchanged, save for the inclusion of matters relating to Mines and Minerals and the exclusion of Ordinary Civil Jurisdiction. Jurisdiction over ordinary civil matters will now be shared by the remaining Benches of the Court. Another notable highlight is that the subject of Ecological Imbalance, previously dealt with by the Bench headed by Justice (retired) Lokur no longer finds a mention in the roster while the social justice matters, which were also exclusively dealt with by Justice Lokur, will be handled by the CJI Bench. Matters relating to Contempt of Court will be placed before the Benches headed by Justice Arun Mishra and Justice UU Lalit besides the CJI. Justice Rohinton Nariman who dealt with a good majority of Company Law and Insolvency cases earlier will no longer hear the same. Cases on Company Law, SEBI and RBI have now been assigned to the CJI and Justice Arun Mishra. As per the newly published roster, two more judges will now head Benches at the Supreme Court - Justices MM Shantanagoudar and Abdul Nazeer.

GST Audit – Reconciling GSTR 3B and GSTR 1

GST Audit – Reconciling GSTR 3B and GSTR 1 The rush for filing GSTR 9 and GSTR 9C is also catching up now a days.GST has played a major role in the Indian economy in the past one year. Now, it’s GST Audit which has become crucial now a days. How to map GSTR 1 v/s GSTR 3B GSTR-1, filed by the supplier, contains invoice-wise and category-wise details of all outward supplies made in a year GSTR-3B is the summary return based on which tax is deposited by the supplier. It contains category-wise summary of both inward and outward supplies and tax payment details. Now, the reconciliation of GSTR-3B and GSTR-1 is of utmost importance since GSTR-3B is a manual return, i.e. it is not auto populated on the basis of GSTR-1 and GSTR-2A. There might be instances where supplier has shown an invoice in GSTR-1 but has not paid tax on that invoice in GSTR-3B. Thus, GST department uses data analytics to reconcile GSTR-1 and GSTR-3B filed by a supplier. That means it automatically reconciles GSTR-1 with GSTR-3B and issues a GST notice for mismatches. One of the main reasons of the differences is, wrong calculation of revenue & tax liability at the time of filling GSTR-3B. For a large business organization, it is very common to have differences in Actual turnover & the turnover recorded in books. This may result in GST liability if turnover as recorded in books of accounts is less than the actual turnover. Again this may result in late payment of GST, which may lead to applicability of interest. Nominal difference in is still accepted, but large data gaps is matter of concern because this can result in heavy interest liability. Problems in mapping the GSTR 9 & 9C: 1. Downloading all files – All files for each branch and each month need to be downloaded from GST Portal. 2. Conversion to excel – for starting any kind of mapping firstly all the files need to be converted into excel in a format that it can be manipulated. 3. Identifying data points to be matched – There are multiple data points in the forms which can be mapped. As GSTR 1 is a detailed return and mapping it with 3B required submission of a number of columns in GSTR 1 for mapping with column of 3B. 4. Huge data and complex sheets – When preparing this sheet for multiple clients and years the data can become too large to handle. The formulas become complex and chances of manual errors cannot be ignored. What are the Key points that can be mapped? For the purpose of GSTR 3B and GSTR 1 mapping from their summaries only 4 from GSTR 3B and and 9 from GSTR 1 are relevant: GSTR 3B section 3.1(a) maps with following columns of GSTR 1 . + 4A, 4B, 4C, 6B, 6C . + 5A, 5B . – 9B (registered) . – 9B (unregistered) . + 7 B2C . + 11 A (1), 11A(2) Advances received . – 11 B (1), 11B (2) Adjustment of Advances GSTR 3B section 3.1 (b) maps with following columns of GSTR 1 . + 6A GSTR 3B section 3.1 (c) maps with following columns of GSTR 1 . + section 8 but only Nil and Exempted Column GSTR 3B section 3.1 (e) maps with following columns of GSTR 1 . + section 8 but only Non- GST Supplies Whereas GSTR-9C is the reconciliation statement to be submitted by those GST registered taxpayers to whom GST audit applies. GST Audit applies to those taxpayers whose turnover exceeds Rs. 2 crore. Audited financial statements must be filed by the taxpayers along with this after obtaining certification from the auditor or a Chartered Accountant or a CMA. FY 2017-18 is the first financial year for filing annual returns and GST audit.

Capital gains exemption u/s 54B & importance of Proof of agricultural activity

Capital gains exemption u/s 54B & importance of Proof of agricultural activity Short overview : As concerned Talathi of land transferred by the assessee was certified in 7/12 extract that Jowar crop was grown on land in last four years in line, therefore, land transferred by the assessee was an agricultural land and capital gain arising from such land was eligible for exemption under section 54B. Assessee claimed exemption under section 54B in respect of capital gain having arisen on piece of land sold by him. AO denied exemption holding land to non-agricultural land on the ground that land was never used for agricultural activity. It is held that concerned Talathi of land transferred by the assessee was certified in 7/12 extract that Jowar crop was grown on land in last four years in line, therefore, land transferred by the assessee was an agricultural land and capital gain arising from such land was eligible for exemption under section 54B. Decision: In assessee’s favour. Relied on: Distinguished: Abhijit Subhash Gaikwad ITA Nos. 699/Pn/2013, etc. IN THE ITAT, PUNE BENCH R.S. SYAL, V.P. & VIKAS AWASTHY, J.M. Murtuza Shabbir Jamnagarwala v. ITO ITA No. 1144/PUN/16 8 February, 2019 Appellant by: Hari Krishan Respondent by: Shabana Parveen ORDER R.S. Syal, V.P. 1. This appeal by the assessee arises out of the order passed by the Commissioner (Appeals)-5, Pune on 26-02-2016 in relation to the assessment year 2008-09. 2. First issue raised in this appeal is against not allowing of exemption under section 54B of the Income Tax Act, 1961 (hereinafter also called ‘the Act’). 3. Succinctly, the facts of the case are that the assessee, along with two others, transferred certain land admeasuring 81 Are equal to 8100 sq.mtr (equal to 2 Acres) on 8-12-2007 to one Mr. Dhanraj Malchand Rati, a Builder and Developer. The assessee computed its share of capital gain at Rs. 27,79,450. The said amount of capital gain was claimed as exempt under section 54B(1) of the Act on the ground that he had purchased two agricultural lands on 28-01-2008 and 22-04- 2008 for a total consideration of Rs. 57,39,500. The assessing officer (AO) noticed that the assessee, along with other two co-owners, entered into a “Development Agreement” with Mr. Dhanraj Malchand Rati for transfer of the land, which was situated within the Municipal Corporation limits of Pune. He held that the land ceased to be an agricultural land. On being called upon to explain as to why the exemption under section 54B of the Act should not be denied because the property transferred was not an agricultural land, the assessee tendered his explanation which has been reproduced in the assessment order. The crux of the assessee’s submission was that the land was classified by the land Revenue authorities as “Jirayat” type of agricultural land and nowhere in the land records it was mentioned as “Non-agricultural land”. The assessee further submitted that agricultural income was earned from such land and as per the 7/12 extract, the agricultural land was subjected to cultivation and Jowar crop was grown. It was further submitted that all the rights in the land were transferred to Mr. Dhanraj Malchand Rati and the nomenclature of “Development Agreement” was misleading. Not convinced with the assessee’s submission, the assessing officer held that the capital gain arising from the transaction was out of non-agricultural land and hence, no exemption under section 54B could be allowed towards investment made by the assessee in two agricultural lands. The learned Commissioner (Appeals) echoed the action of the assessing officer on this score. 4. We have heard both the sides and perused the relevant material on record. The assessee along with other two co-owners transferred 2 acres of land to Mr. Dhanraj Malchand Rati vide agreement dated 8-12-2007. The case of the assessee is that the land transferred by him was an agricultural land and since he invested a sum of Rs. 57,39,500 in purchasing two other agricultural lands, he was entitled to exemption under section 54B of the Act. On the other hand, the Revenue has canvassed a view that since the land transferred by the assessee was non-agricultural land, there can be no grant of exemption under section 54B of the Act. 5. Section 2(14) of the Act defines ‘capital asset’ to mean property of any kind etc. held by the assessee but does not include certain assets including “agricultural land in India”, not being a land situated within 2/6/8 kms, as the case may be, from the local limits of any Municipality. If an agricultural land satisfying the conditions as given in section 2(14) of the Act is transferred, any gain arising from such a transfer is a capital receipt, not chargeable to tax as the same does not arise from the transfer of any capital asset. If on the other hand, certain agricultural land, not satisfying the conditions laid down in section 2(14), is transferred, any profit arising from such a transfer is chargeable to tax under the head “Capital gains”. There is no quarrel over the proposition that the land transferred by the assessee did not satisfy the conditions given in section 2(14) of the Act and hence qualified as a “capital asset”. 6.Section 54B(1) of the Act provides that if “capital gain” arises from the transfer of a capital asset, being, land which was being utilized by the assessee etc. for agricultural purposes in the two years immediately preceding the date of transfer and the assessee has within a period of two years after that date purchased any other land for being used for agricultural purposes, then such capital gain, otherwise chargeable to income-tax as income of the previous year in which the transfer of the land took place, shall qualify for exemption subject to the conditions set out in the provision. The case of the assessee is that he transferred the agricultural land, being, a capital asset and purchased two other agricultural lands for a sum of Rs. 57,39,500 within two years and hence, he is entitled to exemption under section 54B of the Act. The assessing officer has not disputed that the lands purchased by the assessee on 21-8-2008 and 22-4-2008 are agricultural lands. Thus, the second part of the exemption provision, being, purchase of new agricultural lands within period of two years, stands satisfied. The dispute is on the first part of the exemption as to whether or not the land transferred by the assessee was an agricultural land? 7. We have noticed above that it is nobody’s case that the land transferred by the assessee was not a capital asset. Now the question arises as to whether such capital asset was an agricultural land or not? If the assessee succeeds in proving that the land transferred by him was an agricultural land, his claim to exemption under section 54B would be justified. 8. In order to decide if the land transferred was an agricultural land, we will first espouse the factors taken note of by the authorities militating against the claim of agricultural land. The Revenue has deeply relied on the fact that the assessee entered into an agreement dated 8-12-2007 with Mr. Dhanraj Malchand Rati for ‘the development of land’. We have perused the agreement, a copy of which has been placed on page 26 of the paper book. The agreement styled as ‘Development agreement’ was entered into between the assessee and two other co-owners, who transferred the land, on one hand and Mr. Dhanraj Malchand Rati, a builder and developer, on the other. Clause (1) of the Agreement provides the description of the property as 00 Hector 81 Are or 8100 sq.mtr situated at Village Kondhwa Budruk. The assessee and other two co-owners have been defined as “Owners” in this agreement, while Mr. Dhanraj Malchand Rati as a ‘Developer’. It has been mentioned in clause (2) of the Agreement that the Owners have decided to develop and construct the said property for which they forwarded the proposal to the Developer. Consideration has been set out in clause (7) of the agreement at Rs. 1.70 crore. It has been mentioned in clause (6) that the Developer will obtain necessary building plans and sanctioned layouts and maps and he will appoint Architect and will obtain necessary permission and sanctions from the Pune Municipal Corporation. Clause (7) provides that the Developer will construct the said property as per the sanctioned plans and layouts from the Pune Municipal Corporation. Clause (8) states that : “The owners and party of the second part has delivered the actual possession of the said property for the development/construction purpose to the Developer and party of the first part on today”. Clause (9) provides that : “The owners of the said property are not holding any units in relation with the said property as per rules of the Urban Land (Ceiling and Regulation) Act, 1976”. Clause (16) provides that : “The owners of the said property has given entire rights to the said Developer to develop the said property”. Clause (22) provides that: “The owners of the said property has executed the irrevocable Power of Attorney along with the said developer in relation to the scheme of the construction work as per the sanctioned layouts and plans within the said property”. 9.A close scrutiny of various clauses of the Agreement, described as “Development Agreement”, transpires that though the nomenclature of “Development Agreement” was assigned by the parties to the agreement, but it was, in fact, a case of outright sale of 81 Are of land by the assessee and other co-owners to Mr. Dhanraj Malchand Rati. The assessee along with other two co-owners received total consideration of Rs. 1.70 crore in full and did not have any further interest in the property to be constructed by the Developer. The land transferred by the assessee was to be utilized by the transferee for construction of flats to be sold by him at a later date, as owner. The sum and substance of the above clauses is that the assessee transferred the land on an outright sale basis and did not intend to develop the land through Mr. Dhanraj Malchand Rati by retaining his ownership rights in it. 10. We have examined the 7/12 extract of the land transferred by the assessee, whose english translation has also been provided. The first thing which emerges from the 7/12 extract is that the assessee transferred “Jirayat land”. The authorities below have noted from the 7/12 extract that the land in question was “Jirayat land”. The assessee also stated before the assessing officer that the land transferred has been classified as “Jirayat type of agricultural land”. The learned Commissioner (Appeals) has noticed in Para 3.5 of the impugned order that “Jirayat” means ‘a barren land’. Similar fact has been recorded at page 18 of the impugned order, whereby he has held that the “Jirayat land” means that “the land was a fallow land”. It, therefore, emerges that the authorities below have proceeded on the premise that the land transferred by the assessee was a “Jirayat land”, which as per them means a barren or a fallow land. The assessee has admitted w.r.t. the 7/12 extract that the land transferred was a ‘Jirayat land’. However, we find that the meaning ascribed to the Jirayat land by the authorities, is not correct. We have gone through the commentary by A.K. Gupte on “Maharashtra Land Revenue Code, 1966”, relevant pages from which have been placed on record. Certain classification has been given in this commentary, as per which “Jirayat or Jirait” means ‘land appropriated to or fit for agriculture’. The term “Jirayat” has been defined on page 20 of the commentary to mean dry crop land, which means “the cultivation mainly depends upon annual rainfall”. Even otherwise, a Jirayat land is used for seasonal crops like Khariff and Rabi, where cultivation depends upon annual rainfall. In this commentary, it has been mentioned that “land unfit for cultivation” or a barren land is described by the expression “Kharaba”. This discussion shows that the bedrock of the opinion formed by the authorities below, being, the meaning of the term “Jirayat” land as a barren or fallow land, is erroneous. We have examined the English translation of the 7/12 extract of the land transferred by the assessee, which also declares the land in question as “Jirayat land”, which means that it was a cultivable land as against the view of the authorities of the same being a barren or fallow land. The 7/12 extract which deals with the possession/ownership and crops on the land in question provides details of crop grown on it. There is a reference to the years 2004-05 to 2007-08 in this extract and the name of the cultivator has been given as “Self”. The crop grown has been written as “Jowar crop” in all the four years. These facts amply prove that not only the land was a cultivable land, but “Jowar crop” was also raised by the assessee on it during the year under consideration and immediately preceding three years as well. 11. It is further pertinent to note from the 7/12 extract that the land Revenue of the said property has been determined at 33 paise. This fact proves that the land was subjected to land revenue. Another factor which weighs in favour of the assessee is that the land was transferred for a consideration of Rs. 1.70 crore determined by 00 Hector 81 Are area, i.e. 8100 sq.mtr and not by rate of square feet or square yard. 12. At this juncture, it would be pertinent to note the landmark judgment rendered by the Hon’ble Supreme Court in Smt. Sarifabibi Mohmed Ibrahim & Ors. v. CIT (1993) 204 ITR 637 (SC). In that case, the dispute was as to whether the land transferred by the assessee was a capital asset or not? The Hon’ble Supreme court, considering certain other judgments in which some tests for determining the nature of land were set out, came to the conclusion that the land transferred by the assessee was not an agricultural land. The tests so considered and set out in the judgment are reproduced verbatim, as under :– “(1) Whether the land was classified in the revenue records as agricultural and whether it was subject to the payment of land revenue ? (2) Whether the land was actually or ordinarily used for agricultural purposes at or about the relevant time ? (3) Whether such user of the land was for a long period or whether it was of a temporary character or by way of a stopgap arrangement ? (4) Whether the income derived from the agricultural operations carried on in the land bore any rational proportion to the investment made in purchasing the land ? (5) Whether the permission under section 65 of the Bombay Land Revenue Code was obtained for the non-agricultural use of the land ? If so, when and by whom (the vendor or the vendee) ? Whether such permission was in respect of the whole or a portion of the land ? If the permission was in respect of a portion of the land and if it was obtained in the past, what was the nature of the user of the said portion of the land on the material date ? (6) Whether the land, on the relevant date, had ceased to be put to agricultural use? If so, whether it was put to an alternative use ? Whether such cesser and/or alternative user was of a permanent or temporary nature ? (7) Whether the land, though entered in revenue records, had never been actually used for agriculture, that is, it had never been ploughed or tilled ? Whether the owner meant or intended to use it for agricultural purposes ? (8) Whether the land was situate in a developed area ? Whether its physical characteristics, surrounding situation and use of the lands in the adjoining area were such as would indicate that the land was agricultural ? (9) Whether the land itself was developed by plotting and providing roads and other facilities ? (10) Whether there were any previous sales of portions of the land for non-agricultural use ? (11) Whether permission under section 63 of the Bombay Tenancy & Agricultural Lands Act, 1948, was obtained because the sale or intended sale was in favour of a non-agriculturist was for non- agricultural or agricultural user ? (12) Whether the land was sold on yardage or on acreage basis ? (13) Whether an agriculturist would purchase the land for agricultural purposes at the price at which the land was sold and whether the owner would have ever sold the land valuing it as a property yielding agricultural produce on the basis of its yield ? Holding the land in question as a non-agricultural land and hence a ‘capital asset’, their Lordships further held that the question as to whether a land is agricultural land or not needs to be tested on the facts and circumstances of each case. There may be factors both for and against a particular point of view and the question needs to be answered on a cumulative consideration of all the relevant facts. 14. When we examine the facts of the instant case on the touchstone of the tests enshrined above, it becomes manifest that the following important factors weigh for and against the assessee :– For: — (i) the land was classified in the revenue records as “agricultural land” and was subject to land revenue. (ii) the land was actually used for agricultural purposes at the relevant time. (iii) user of such land was not temporary and was for at least 4 years in a row, as emerged from 7/12 extract. (iv) the land was not sold on yardage basis. Against : — (i) the land was situated in a developed area. (ii) after transfer, it was to be developed by plotting and providing road facilities etc. 15. On a cumulative consideration of all the relevant factors prevailing in the instant case, both for and against the treatment of land transferred by the assessee as agricultural land, we have no hesitation in holding that the assessee transferred ‘agricultural land’ to Mr. Dhanraj Malchand Rati. It is so for the reason that the land was classified as “agricultural land” in land revenue records; subjected to land revenue; was being cultivated on which “Jowar crop” was grown. Reliance placed by the learned Departmental Representative on a Tribunal Order, dt. 27-5-2015 passed in the case of Abhijit Subhash Gaikwad (ITA Nos. 699/Pn/2013 etc.) is misplaced in as much as the Tribunal returned a categorical finding in that case that the concerned Talathi had stated : “that the land was never used for agricultural activity”. This position is contrary to the extant case. Here the concerned Talathi of the land transferred by the assessee has certified in the 7/12 extract that the “Jowar Crop” was grown on the land in last four years in line. It is, therefore, held that the land transferred by the assessee was an “agricultural land” and the capital gain arising from such land is eligible for exemption under section 54B of the Act. We, therefore, overturn the impugned order on this issue and uphold the assessee’s point of view. 16. The only other ground raised by the assessee in his appeal is against treatment of agricultural income of Rs. 1,12,000 as “income from other sources”. 17. It is noticed that the assessee offered agricultural income at Rs. 1.12 lakh. The assessing officer treated the same as chargeable to tax, which view came to be upheld in the first appeal. We have held in earlier paras of this order that the land transferred by the assessee was an agricultural land on which jowar crop was raised. However, in order to claim exemption for a particular sum as an agricultural income, it is sine qua non for the assessee to prove the quantum of agricultural income claimed with relevant evidence. Existence and quantum of agricultural income are two separate things. The learned Authorised Representative fairly conceded that no formal sale of crop receipts were available as the “Jowar crop” was sold directly without routing it through commission agents. In view of the foregoing and in the absence of direct evidence of quantum of income, we estimate the existence of agricultural income in the peculiar facts of this case at half of the amount declared at Rs. 56,000 and the remaining half is held to be “Income from other sources”. 18. In the result, the appeal is partly allowed.

Step-by-step guide for filing income tax returns online

Step-by-step guide for filing income tax returns online With new income tax return forms now notified, here is a step-by-step guide for filing income tax returns. Income tax return filing may seem like a big deal for the beginners. However, following sequential steps would make the task easy. July 31st is the last date for filing income-tax return for salaried assessee. 1. Preparing statement of income: First & foremost, assessee should prepare the statement of income by incorporating all the income including FD/SB Interest, exempt income details, capital gain, salary/rental income, loss brought forward & carried forward, investment eligible for deduction etc. Once income statement is ready, taxpayer should compute the tax & if there is any balance tax liability after considering TDS/advance tax paid, then pay it along with interest, if any. One should verify the tax details by downloading Form No. 26AS from incometaxindia.gov.inwhich shows all the details like TDS & other taxes paid in the relevant year. 2. Select correct ITR forms for filing: Before filing, taxpayer should ascertain the correct ITR forms in which return has to be filed. Make sure that the correct form is chosen for filing. If the wrong form is selected, it will be considered as a failure to file returns by the IT department. For salaried taxpayer & other taxpayers who don’t have any business income, ITR-1 or 2 is applicable. Procedure for filing the returns: I] Whether to file online or physically?: Now, most of the returns are required to be filed online in electronic mode only and the paper filing is restricted in following two cases only. 1. Very Senior Citizens of the age of 80 years or more at any time during the previous year. 2. Individual/HUF filing ITR 1/ ITR 4 not having a refund claim in the return & total income is not more than Rs. 5,00,000 II] Procedure for paper filing: One can take the printout of the ITR form from the above mentioned website. After filling all the relevant details like personal information, income details, tax deposit details in the hard copy, one can sign & submit the same with the jurisdictional assessing officer. The receiving office at the income tax office will stamp your acknowledgement and give a copy back to you. Assessee is not require to submit any other supporting documents with the tax return. Taxpayer may check the tax jurisdiction by logging at the above quoted income-tax department website. III] Procedure for filing return online: a] The online filing process starts by clicking the ‘register’ link at income-tax e-filing website incometaxindiaefiling.gov.in. For registration, one has to provide personal details like PAN, name as per the PAN card, father’s name, date of birth, email address and contact number. The website provides required flow to complete the registration process. b] Download the applicable return preparation form from the website and fill in the personal information and income-related details in the downloaded form. To ensure that all columns in the return form are file in properly, there is a process to validate the information by clicking on the ‘validate’ button on the last sheet. c] On successful validation, access the ‘generate XML’ link in the tax return software and save the generated XML file. It is the XML file which is upload on the e-filing website. An acknowledgement form in ITR-V is generate on successful e-filing. d] If the return is filed without using digital signature & without mentioning aadhar card, taxpayer would be required to take the print out of ITR-V, sign it in blue ink and dispatch it by ordinary/speed post to the Central Processing Centre (CPC), Bangalore within 120 days of uploading the return. On receipt of the signed ITR-V, tax department will send an email acknowledging the receipt of the ITR-V at the email id mentioned in the return form. There is no need to send ITR-V in the local office of the income-tax department. It may be noted that ITR-V is a password protected document & the password is PAN and date of birth in small case in continuation. [Using aadhar number is optional as of now. The government has come up with an idea of dispensing with the formality of forwarding the duly signed ITR-V form to CPC, Bengaluru, if the taxpayer provides with the Aadhaar number at the time of filing].

Maintenance charges paid directly to the service provider can not be treated as “Rent” in the hands of owner

Maintenance charges paid directly to the service provider can not be treated as “Rent” in the hands of owner Vinod Arora, New Delhi vs Department Of Income Tax Income Tax Appellate Tribunal – Delhi Vinod Arora, New Delhi vs Department Of Income Tax ITA NO. 827/Del/2012 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “H”, NEW DELHI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI C.M. GARG, JUDICIAL MEMBER I.T.A. No. 827/Del/2012 A.Y. : 2008-09 ADIT, CIR.1(1) (Int. Taxation), vs. Mr. Vinod Arora, 204, Drum Shape Bldg., B-27, Mayfair Garden, I.P. Estate, New Delhi – 110 016 New Delhi – 110 002 (PAN/GIR NO. : AACPA9466A) (Appellant ) (Respondent ) Assessee by : Sh. Sunil Goel, Suhel Goel, CA’s Department by : Sh. Pirthi Lal, Sr. D.R. ORDER PER SHAMIM YAHYA: AM This appeal by the Revenue is directed against the order of the Ld. Commissioner of Income Tax (Appeals)-XXIX, New Delhi dated 14.10.2011 pertaining to assessment year 2008-09. The grounds raised read as under:- “i) On the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (A) has erred in holding that the interest income earned by the assessee amounting to ` 2,64,172/- was taxable at the rate of 12.5% under the India UAE DTAA instead of at the rate of 40% under the Income Tax Act, failing to ITA NO. 827/Del/2012 appreciate that no tax residence certificate has been produced by the assessee. ii) On the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (A) has erred in holding that the short term capital gains amounting to ` 84,66,054/- were not taxable in India in terms of Article 13(3)of the India UAE DTAA. Failing to appreciate that there was not double taxable in the assessee’s case as UAE has not tax regime and the impugned short term capital gains would not be taxable in UAE. iii) On the facts and in the circumstances of the case, the Ld. Commissioner of Income Tax (A) has erred in holding that while computing the annual value of the house property, the assessee is eligible to claim the deduction of ` 22,888/- on account of maintenance charges paid to the cooperative society, failing to appreciate that the Act dopes not provide for any further deduction on account of repair and maintenance, over and above the standard 30% deduction provided u/s. 24 of the Act. iv) The appellant craves to add, amend, modify or alter any grounds of appeal at the time or before the hearing of the appeal.” Apropos issue of interest income earned by the assessee amounting to ` 2,64,172/-. ITA NO. 827/Del/2012 The assessee was resident of Dubai and was holding UAE resident’s permit/ visa. The assessee had earned interest income of ` 2,64,172/- during the year under appeal. Assessee offered the interest to tax @ 12.5% under Article 11(2)(b) of Indo-UAE Double Taxation Avoidance Agreement (DTAA). However, Assessing Officer relied upon the assessment order for the assessment year 2007-08 and held that the assessee was not eligible for the benefit of DTAA and taxed the interest income at the normal rate of 40% under the Income Tax Act, 1961. While disallowing the claim of the assessee the Assessing Officer observed that the assessee was not able to produce the tax residency certificate of UAE and the documents filed by it, i.e. the copy of the passport and driving license, were not sufficient evidence to establish that the assessee was a resident of UAE. Upon assessee’s appeal Ld. Commissioner of Income Tax (A) noted that the same issue was considered by the Ld. Commissioner of Income Tax (A) in assessee’s own appeals for assessment years 2006- 07 & 2007-08 and the appeals were allowed in this regard. While allowing the relief to the assessee, the Ld. Commissioner of Income Tax (A) in this regard referred to Circular No. 734 dated 24.1.1996 issued by the CBDT, wherein it was clarified as under:- “2. The Board in its Circular No. 728 (F.No. 500/12/95-FTD) dated 30.10.1995 have already clarified that in case of a remittance to a country ITA NO. 827/Del/2012 with which a Double Taxation Avoidance Agreement is in force, tax should be deducted at the rates provided in the Finance Act of the relevant year or at the rates provided in the DTAA, whichever is more beneficial to the assessee. Once again it is clarified that in respect of payments to be made to the Non-resident Indians at UAE, tax at source must be deducted at the following rates: ii) Interest – (b) 12-1/2% of the gross amount of the interest in all other cases.” Considering the above, Ld. Commissioner of Income Tax (A) held that wordings of the circular are clear and unambiguous. In case of Non-resident Indians at UAE, tax on interest income is required to be deducted at source at the rate of 12-1/2% of the gross amount of interest. Hence, Ld. Commissioner of Income Tax (A) decided the issue in favour of the assessee and directed the Assessing Officer to tax the interest income of the assessee @ 12.5% in terms of Article 11(2)(b)of the Indo-UAE DTAA. Against the above order the Revenue is in appeal before us. We have heard the rival contentions in light of the material produced and precedent relied upon. We find that assessee in this case is a UAE resident. The DTAA with the UAE mandates that interest income be taxed @ 12.5% under Article 11(2)(b)of the said ITA NO. 827/Del/2012 DTAA. Furthermore, Board Circular No. 728 referred hereinabove also supports the case of the assessee. We further find that Ld. Commissioner of Income Tax (A) has noted that in assessee’s own case for assessment year 2006-07 and 2007-08, the appeals were allowed in this regard. Ld. Departmental Representative could not controvert these submissions. Under the circumstances, we uphold the order of the Ld. Commissioner of Income Tax (A) on this issue and decide the issue in favour of the assessee. Apropos issue of short term capital gains On this issue Assessing Officer denied the benefit of Indo UAE DTAA to the assessee in respect of short term capital gains of ` 84,55,054/- and levied tax @ 10% alongwith the surcharge and education cess in accordance with the provisions of section 111A of the Act. Assessee claimed that since the assessee was a tax resident of UAE, the income from short term capital gains was not chargeable to tax in accordance with the provisions of Article 13(3)of the Indo-UAE DTAA. While rejecting the claim of the assessee, Assessing Officer relied upon the assessment order for 2007-08 wherein it was held that the benefit of Indo UAE Treaty was not available to the assessee as it was not liable to pay tax in the UAE on its income from short term capital gains. Upon assessee’s appeal Ld. Commissioner of Income Tax (A) noted that the said issue was considered by his predecessor in the appeal filed by the assessee for the assessment year 2007-08. While deciding this appeal his predecessor relied upon his own order dated 30.3.2010 in the case of Mustaq Ahmed Vakil in Appeals No. 269/06- 07, 104/07-08 and 71/08-09 wherein it was held as under:- ITA NO. 827/Del/2012 “I have carefully considered the points made by the Assessing Officer in the assessment order, submissions of the appellant and the various decisions relied upon by the appellant. The issue has been dealt with extensively by the AAR in its various orders. Two AAR rulings are in favour of the department. In the case of Cyril Eugene Pereira (239 ITR 650) it was held that as individuals do not pay tax in the UAE, the applicant Cyril Pereira was not a tax resident of the UAE and was not entitled to the beneficial provisions of the India-UAE tax treaty. In the case of Abdul Razak Memam, (146 Taxman 115) the AAR held that investors of the UAE have to pay Capital Gains tax on their investments in India. The AAR was of the view that DTAA between India and the UAE was not useful for the purpose since UAE does not have a tax regime. Two of the AAR’s rulings i.e. in the case of M.A. Rafique and Emirate Fertilizers Trading are in favour of the appellant. In M.A. Rafique (213 ITR 317), dated 23.12.1994, the AAR held that the applicant was eligible to the benefits of the India-UAE tax treaty and that the capital gains would not be subject to tax in India. The AAR observed – “That though there was no income tax or wealth tax on individuals in any of the UAE nations, the fact that a comprehensive agreement (tax treaty) was considered necessary in spite of a clear knowledge that there was no such tax on individuals in UAE could only mean that the agreement was intended to encourage the inflow of funds from Dubai and other Emirates to India for investment.” In the case of Emirates ITA NO. 827/Del/2012 Fertilizer Trading (192 CTR (AAR) 590), dated 27.10.2004, AAR has held that merely because there is no tax incidence in the other country, it does not imply that such income can be taxed in India and that under article 13(3) of the treaty capital gains realized by a UAE resident were taxable only in the UAE and not in India. Based on the provisions of the Income Tax Act, the AAR held, “The tax treaty has an overriding effect over the provisions of the I.T. Act. Thus, the capital gains arising to the UAE resident on sale of the shares of an Indian company cannot be taxed in India.” The Mumbai Tribunal in the case of Green Emirates Shipping and Travels (99 TTJ 988), dated 30.11.2005, after considering various rulings of the AAR and the judgement of the Hon’ble Supreme Court in Azadi Bachao Andolan held that ‘Liable to Tax’ in the Contracting State does not necessarily imply that the person should actually be liable to tax in that Contracting State by virtue of an existing legal provision but would also cover the cases where the other Contracting State has the right to tax such persons, whether or not such a right is exercised. The same Tribunal in the case of Meera Bhatia (2010-TIOL-46-ITAT-Mum) dated 29.10.2009 after relying on the Green Emirates Shipping case held that “It may result in double non-taxation but then we cannot be oblivious to the fact that double non taxation is also a fact of life, and tax sparings, which find place in several Indian tax treaties, are also a reality in international taxation.” ITA NO. 827/Del/2012 Keeping in view the above mentioned decisions, it is held that the benefit of the Indo-UAE tax treaty is available to the appellant and Article 13(3) of the Indo-UAE treaty is applicable in its case. This view gets further support from notification no. 282/2007-08 – FTD (F.No. 503/5/2004-FTD) dated 28.11.2007 whereby the treaty between India and UAE was amended and capital gains on transfer of shares were made taxable in India w.e.f 1.4.2008 which means that the same were not taxable before 1.4.2008.” Ld. Commissioner of Income Tax (A) noted that the order of his predecessor in Mustaq Ahmed Vakil has been upheld by the ITAT, Delhi vide order dated 24.9.2010 in I.T.A. Nos. 3424, 3425, 3426/Del/2010 by holding as under:- “The Ld. Commissioner of Income Tax (A) has also followed the order of the Tribunal in the case of Green Emirate Shipping & Travels referred to above. Respectfully following the order of the Tribunal in the case of Ramesh Kumar Goenka, we do not find any reason to interfere in the order of Ld. Commissioner of Income Tax (A). All the three appeals filed by the Revenue are dismissed.” Considering the above, Ld. Commissioner of Income Tax (A) noted that it is not in dispute that the facts of the case are squarely covered by the ratio of decision of ITAT in the case of Mustaq Ahmed Vakil. Ld. Commissioner of Income Tax (A) further noted that the provisions of amended treaty are applicable in respect of income arising on or after 1.4.2008. Therefore, Ld. Commissioner of Income Tax (A) considered the precedent and held that benefit of Indo UAE ITA NO. 827/Del/2012 Treaty is available to the assessee and Short Term Capital Gains derived by him for shares/securities in India were not taxable in India in terms of Article 13(3)of the Indo-UAE tax treaty. Accordingly, Ld. Commissioner of Income Tax (A) decided the issue in favour of the assessee. Against the above order the Revenue is in appeal before us. We have heard the rival contentions in light of the material produced and precedent relied upon. We find that the identical facts were considered by the ITAT in the case of Mustaq Ahmed Vakil cited above. The tribunal decided the issue in favour of the assessee. These facts were not controverted by the Ld. Departmental Representative. Hence, we find that there is no infirmity in the order of the Ld. Commissioner of Income Tax (A). Accordingly, we hold that the benefit of Indo-UAE Treaty is available with the assessee and short term capital gains derived by him from sale of shares/ securities in India were not taxable in India terms of Article 13(3)of the Indo-UAE Tax Treaty. Apropos issue of claim of deduction of ` 22,888/- On this issue the assessee claimed deduction of ` 22,888/- paid to the cooperative society while computing the Annual Letting Value (ALV) of the property u/s. 23 of the Act. Assessing Officer rejected the claim of the assessee on the ground that deemed deduction of 30% of the net annual value u/s. 24 of the Act subsumes the repair and maintenance expenses of all kind and no further deduction was to be allowed while computing ALV of the residential house. ITA NO. 827/Del/2012 Before the Ld. Commissioner of Income Tax (A) assessee submitted that the impugned charges were paid by it towards common maintenance of the building including provision of lift, cleaning of common areas etc. provided by the society to the occupants of the flats. It was further submitted that under clause 3 of the agreement entered into by the assessee with the tenant, the rent paid by the tenant included charges paid to the society utilities, services etc. by the assessee on behalf of the tenant for availing such facilities. Assessee contended that while computing the rent received by it from the tenant, the amount of ` 22,888/- should have been excluded from the gross amount of the rent received by the assessee since it was only reimbursement of the utility charges paid by the assessee to the society on behalf of the tenant for the services enjoyed by the tenant. Assessee further relied upon the catena of case laws. 15.1 Considering the above, Ld. Commissioner of Income Tax (A) held that he agreed with the assessee that amount of service charges received by the assessee from the tenant should be netted, i.e. the rent received by the assessee from the tenant should be arrived at after reducing the amount of ` 22,888/-, being the reimbursement of service charges paid to the society by the assessee on behalf of the tenant for the services such as provision of lift, cleaning of commons areas etc., enjoyed by the tenant. Ld. Commissioner of Income Tax (A) further observed that the identical issue was considered by his ITA NO. 827/Del/2012 predecessor in assessee’s own appeal in assessment year 2007-08 and the issue was decided in favour of the assessee and it was held that services charges were not required to be reduced from the gross receipt received by the assessee arriving at the ALV. Considering the above Ld. Commissioner of Income Tax (A) held that the Assessing Officer is directed to allow the deduction of ` 22,888/- while computing the netted ALV of the house. Against the above order the Revenue is in appeal before us. We have heard the rival contentions in light of the material produced and precedent relied upon. We find that assessee has claimed a sum of ` 22,888/- was paid by it towards common maintenance of the building including the provision of lift, cleaning of common areas etc. provided by the assessee to the occupants of the flat. Thus, it is the assessee’s argument that while determining the rent receipt by it from the tenant, the amount of ` 22,888/- should have been excluded from the gross amount of the rent received by the assessee since it was only reimbursement of the utility charges paid by the assessee to the society on behalf of the tenant for the services enjoyed by the tenant. In our considered opinion, the view adopted by the Ld. Commissioner of Income Tax (A) is cogent one. We further note that Ld. Commissioner of Income Tax (A) has noted that assessee’s own case for A.Y. 2007-08, the said issue was decided in favour of the assessee by the Ld. Commissioner of Income Tax (A). ITA NO. 827/Del/2012 This fact was not controverted by the Ld. Departmental Representative. Under the circumstances, in the facts and circumstances of the case, we do not find any illegality or infirmity in the order of the Ld. Commissioner of Income Tax (A). Accordingly, we uphold the same. In the result, the appeal filed by the Revenue stands dismissed. Order pronounced in the open court on 31/8/2012. SD/- SD/- [C.M. GARG] GARG] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER Date 31/8/2012 “SRBHATNAGAR” Copy forwarded to: – Appellant 2. Respondent 3. CIT 4. CIT (A) DR, ITAT TRUE COPY By Order, Assistant Registrar, ITAT, Delhi Benches

GST – Construction service - Actual land deduction?

GST – Construction service - Actual land deduction? - Shrikhand Business Solution Pvt Ltd. Valuation is the measurement of value on which any tax has to be paid. The typical construction contract is the composition of three components namely - Land or an undivided portion of land in case of apartments - Materials/goods like cement, steel etc., - Services like labour in construction, designing etc., Before GST is introduced, different indirect taxes were levied on the above mentioned three components. State government levied VAT on materials portion, the Central government levied service tax on service portion. Due to practical difficulties in arriving the exact value of each component and taxing such component by at full rate by the respective Government, every state VAT law used to provide the composition rates. Similarly, service tax law also used to prescribe the deemed valuation by way of abatements. After the introduction of GST w.e.f. 01.07.2017, the bifurcation of materials and service components are not warranted as such composite contracts are now fully deemed as services. However, with the presence of the third component i.e. sale of land which was kept outside the GST, need arises to prescribe the mechanism to identify the land value from the total amount received and taxing only the net of land value. For this reason, GST law (vide Notification No. 11/2017- Central tax (Rate) dated 28.06.2017 as amended provides that GST rate applicable is 18% on 2/3 rd of the total amount received which was formulated as (total amount received – 1/3 rd of such total amount which was deemed as land value). Thus, making the effective rate as 12% of the total amount received from the customer. The GST rates are referred as 18% while explaining the implications of actual deduction of land v. 1/3 rd deemed deduction of land, readers may note that w.e.f. 01.04.2019, the rate is revised to 7.5% (effective rate of 5%) in case of non-affordable residential apartments and 1.5% (effective rate of 1%) in case of affordable residential apartments subject prescribed conditions. The analysis would be relevant even after 01.04.2019 as there is no changes in the provisions for land deduction. For example, the amount received from the customer is 4,500/- per sq. ft then the GST shall be paid at 18% of 3,000 (4,500-1,500) which indirectly means 12% on 4,500. The 1,500 arrived as 1/3rd of 4,500 and same was deemed as value collected from customer towards the sale of land or an undivided portion of land. While providing the rate, the law, in fact, a delegated notification deemed that 1/3rd of the total amount is the amount collected towards the sale of land or an undivided portion of land. Now the question arises whether such deemed value of land is to be mandatorily followed? On a plain reading of the notification, the answer is yes, as the law provides for deemed value and has not given any scope to deduct the actual land thereby making the actual land value irrelevant while applying the above referred rate of 12%. Mandatory deduction towards land @1/3rd might be sufficient or even be on the higher side if the project is located in the suburban or rural areas. However, in the metros, premium or semi-premium localities where land value is almost 60-90% of the unit value, this deduction is not sufficient. The law should have provided the mechanism to reduce the value of land in the prescribed manner and it should have been left to the option of the builder to pay tax at the reduced rate of 12% if he is unable to value the land. In many southern States, traditionally builders execute two agreements - One is sale deed conveying the title of land (undivided portion in case of apartments). - Other is ‘construction agreement’ popularly known as work order which is entered to undertake the construction work on the land which was already conveyed to such customer through the above referred agreement There is a clear identification of consideration towards land but the GST law does not recognise these values to deduct from the total amount and uniformly fixes that land value as 1/3 rd . The readers may note that there are advance rulings stating that though there exists separate agreement for sale of land/undivided share land, the GST shall be paid on the total value including the amount charged towards land thereby implying that deemed deduction of 1/3 rd is mandatory in all cases and actual value of land is to be ignored. In Re: Kara Property Ventures LLP 2019-TIOL-86- AAR-GST; In Re: Sanjeev Sharma 2018 (13) G.S.T.L. 395 (A.A.R. - GST) Whether such deeming value of land amounts to taxing the land component? Undoubtedly, the GST is not applicable on the sale of land. That being a case, the question is whether land can be subjected to GST indirectly through an artificial valuation of construction. More so considering the settled jurisprudence that one cannot achieve by indirect means what one is not permitted to do directly. Judicially, the Courts have permitted the Governments to prescribe a larger value not exclusively limited to the particular nature of the tax. in this regard, the decision of Hon’ble Apex court (larger bench) in case of Commissioner v. Grasim Industries Ltd 2018 (360) E.L.T. 769 (S.C.) held that measure of the levy will not be controlled by the nature of the levy. So long a reasonable nexus is discernible between the measure and the nature of the levy and measure/valuation would operate in their respective fields. When there is availability of actual value of land or can it be Challenged? Authors are of the view that the 1/3 rd deemed deduction of land can be challenged on the ground that Government can devise the formula for capturing the taxable portion of composite contract consists of both taxable (labour & materials) & non-taxable components (land) only when there is no bifurcation is available. It should not be made universal or apply in all cases of composite contracts. That is to say Government cannot override or ignore the identified components while providing for deemed valuation or so called formula. This is more specifically when the agreements/records of assessee clearly capture the taxable component. In this regard, ratio of Hon’ble supreme court decision in case of Wipro Ltd v. Assistant Collector Of Customs 2015 (319) E.L.T. 177 (S.C.) can be referred wherein it was held that “We are also of the opinion that when the actual charges paid are available and ascertainable, introducing a fiction for arriving at the purported cost of loading, unloading and handling charges is clearly arbitrary with no nexus with the objectives sought to be achieved. On the contrary, it goes against the objective behind Section 14 namely to accept the actual cost paid or payable and even in the absence thereof to arrive at the cost which is most proximate to the actual cost. Addition of 1% of free on board value is thus, in the circumstance, clearly arbitrary and irrational and would be violative of Article 14 of the Constitution. (Para 31) No doubt, rulemaking authority has the power to make Rules but such power has to be exercised by making the rules which are consistent with the scheme of the Act and not repugnant to the main provisions of the statute itself. Such a provision would be valid and 1% F.O.B. value in determining handling charges, etc., could be justified only in those cases where actual cost is not ascertainable. (Para 32) 34. In the present case before us, the only justification for stipulating 1% of the F.O.B. value as the cost of loading, unloading and handling charges is that it would help Customs authorities to apply the aforesaid rate uniformly. This can be a justification only if the loading, unloading and handling charges are not ascertainable. Where such charges are known and determinable, there is no reason to have such a yardstick. We, therefore, are not impressed with the reason given by the authorities to have such a provision and are of the opinion that the authorities have not been able to satisfy as to how such a provision helps in achieving the object of Section 14 of the Act. It cannot be ignored that this provision as well as Valuation Rules are enacted on the lines of GATT guidelines and the golden thread which runs through is the actual cost principle. Further, the loading, unloading and handling charges are fixed by International Airport Authority.” Further decision in case of Federation of Hotels & Restaurants Association of India v. UOI 2016 (44) S.T.R. 3 (Del.) wherein while dealing with the Rule 2C of service tax (determination of value) Rules, 2006 it was clearly held that “It also requires to be kept in mind that the ready reckoner formula is useful where an assessee does not maintain accounts in a manner that will enable the assessing authority to clearly discern the value of the service portion of the composite contract. It hardly needs emphasis that when during the course of assessment proceedings an assessee is able to demonstrate, on the basis of the accounts and records maintained by it for that purpose, that the value of the service component is different from that obtained by applying Rule 2C the assessing authority would be obliged to consider such submission and give a decision thereon.” The authors view therefore is that the actual deduction of land is permissible when it is supported by the sufficient evidence and the 1/3 rd deduction is not always mandatory and can be challenged.