The AAR pointed out that the taxpayer`s primary jurisdiction in the transformation of raw land into a well-developed residential complex and not in the sale of land. Activities include measuring the land, establishing a detailed map of the proposed layout, evacuating/levelling the land, constructing roads, designing and creating common equipment, etc. The land sales activity is incidental to the main activity of the development of the land. In addition, several provisions of the agreement indicate that the taxpayer is not entitled to the property and is therefore not involved in the sale of land in accordance with Annex III of the CGST Act. With respect to valuation, Rule 31 of the CGST rule applies and the value of the delivery is 25% of the market value of each building received by the subject. Thus, this value is calculated taking into account the value of similar dwellings charged by the developer on the date when these operating rights are transferred when development rights have been transferred in the form of residential and commercial housing. As stated in Communication 5 / 2019 – Central Tax (rate) of March 29, 2019, in which the service is provided by transfer of operating rights for the construction of residential and commercial housing, the tax must be paid by the beneficiary in accordance with Section 9 (3) of the CGST Act, 2017. Therefore, the developer who is a beneficiary must pay taxes on the services mentioned above. This section has only been made applicable from A.Y.2018-19, which leaves no doubt that it should apply only from that evaluation year.
But if you look at the purpose of this section, as explained in Finance Bill 2017, it tries to minimize the true hardness that the owner can suffer when paying capital gains tax in the transfer year. It is, therefore, basically a beneficial or curative provision that aims to eliminate distress. It can therefore be interpreted that such a provision should only be applied retroactively. In the case of Allied Motors (P.) Ltd. v CIT 1997 (3) TMI 9 – SUPREME COURT and CIT v. Alom Exrusions Ltd. 2009 (11) TMI 27 – SUPREME COURT, the decision of the Supreme Court of Hon`ble may be referred to. The Joint Development Contract (also known as JDA) is a contract between a landowner and a real estate developer to build a new project on the owner`s land.