Whether charges collected by the Promoter developer from flat buyers in terms of provisions of Section 5 of the Maharashtra Ownership of Flats (Regulation) Act, 1963 are liable to service tax under 'Management, maintenance and repair services

Hiranandani Construction (P.) Ltd. vs. CCE [2014] 43 taxmann.com 172 (Mumbai – CESTAT)

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Facts of case:

The appellant was engaged in the construction of residential complex and collected certain amounts as the development and maintenance fees from the flat buyers before handing over to them possession of the flats. Such sum was collected by it as a promoter to discharge payments towards outgoing expenses including any municipal local taxes, property tax, water charges, electric charges, revenue assessment or interest or any

mandatory charges under the pro visions of section 5 of the Maharashtra Ownership of Flats (Regulation) Act, 1963. The Appellant was under obligation to return the balance amount, if any, after debiting the expenses, while handing over the possession. The department considered the activity as taxable under the category of "management, maintenance and repair services".

Held:

The Tribunal after perusing the provisions of section 5 of the Maharashtra Ownership of Flats (Regulation) Act, 1963, held that the Appellant has made out a strong case in their favour and accordingly unconditional waiver and stay for recovery was granted.