State Consumer Disputes Redressal Commission
Gaurav Mutneja vs Greater Mohali Area Development ... on 4 April, 2018
2nd Additional Bench
STATE CONSUMER DISPUTES REDRESSAL COMMISSION,
PUNJAB, CHANDIGARH
Execution Application No. 102 of 2017
in
Consumer Complaint No. 140 of 2016
Date of Institution : 05.07.2017
Date of Reserve : 22.03.2018
Date of Decision : 04.04.2018
Gaurav Mutneja S/o Sh. Vinay Kumar Mutneja, R/o Flat No. 123,
Block-D, Bollywood Heights-2, Peer Muchella, Zirakpur (Punjab)
.... Decree Holder /Complainant
Versus
1. Greater Mohali Area Development Authority (GMADA), through
the Chief Administrator, Room No. 102, PUDA Bhawan, Sector 62,
Sahibzada Ajit Singh Nagar (MOhali), Punjab.
2. The Estate Officer - (Housing), Greater Mohali Area Development
Authority (GMADA), Room No. 251, PUDA Bhawan, Sector 62,
Sahibzada Ajit Singh Nagar (Mohali), Punjab.
3. Sh. Mahesh Bansal, Estate Officer-(Housing), Greater Mohali
Area Development Authority (GMADA), Room No. 251, PUDA Bhawan,
Sector 62, Sahibzada Ajit Singh Nagar (Mohali), Punjab
......Judgment Debtors/Opposite Parties
Execution Application under Section 27 of
the Consumer Protection Act, 1986 against
the order dated 10.3.2017 passed in C.C. No.
140 of 2016 by this Commission.
Quorum:-
Shri Gurcharan Singh Saran, Presiding Judicial Member.
Shri Rajinder Kumar Goyal, Member
Execution Application No. 102 of 2017 2
in Consumer Complaint No. 140 of 2016
Present:-
For the decree holder/ : Sh. Munish Goel, Advocate with
complainant Sh. V.K. Mutneja, father of D.H.
For the JDs/Ops : Sh. G.S. Arshi, Advocate with
Sh. Mahesh Bansal, E.O.
GURCHARAN SINGH SARAN, PRESIDING JUDICIAL MEMBER
ORDER
Consumer Complaint No. 140 of 2016 was decided by this Commission on 10.3.2017 and Ops were directed as under:-
"(i) calculate interest @ 8% compounded annually on a sum of Rs. 63,30,750/- on the date of deposit till payment and after deducting the amount already paid, the balance amount be paid to the complainant;
(ii) pay Rs. 2 Lacs on account of compensation for physical and mental harassment and compelling the complainant to go for litigation for not completing the flats within the stipulated time and not to pay the amount due to the complainant; and
(iii) pay Rs. 21,000/- as litigation expenses.
The abovesaid directions be complied within 45 days from the receipt of certified copy of the order, otherwise, entire payment will carry interest @ 8% per annum before 45 days referred above."
2. Consequent upon the order passed in the complaint by the State Commission, the complainant/decree holder has filed this execution application to execute the order. During the pendency of the execution application, a sum of Rs. 17,20,638/- was paid to the Execution Application No. 102 of 2017 3 in Consumer Complaint No. 140 of 2016 decree holder vide DD No. 662680 dated 23.8.2017 and DD No. 662684 dated 7.9.2017 for a sum of Rs. 2,50,018/- was paid and the dispute is now with regard to Service Tax and TDS deducted by the Ops from the account of the complainant.
3. Ops had filed Appeal No. 1330 of 2017, which has been decided by the Hon'ble National Commission vide order dated 1.3.2018, vide which the appeal filed by the Ops was disposed off by the Hon'ble National Commission with the observation that there is no final findings on the issue of service tax and TDS and the same has been kept open depending upon the applicability of the relevant statutory provisions and the availability of the documents for deposit of the said amounts. In the absence of any conclusive finding on the said deductions and in the light of above observations, the issue be examined by the Executing Court with reference to the relevant provisions and production of relevant documents. With regard to Service Tax it has been observed by this Commission in para No. 7 of the order passed in the Consumer Complaint No. 140 of 2016, which reads as under:-
"7. An other plea has been taken by the counsel for the complainant that a sum of Rs. 21,321/- has been deducted on account of service tax and Rs. 11,239/- on account of TDS. Service Tax is to be paid by the complainant in case services were rendered by Op. In case no services were rendered then Ops were not entitled to deduct the Service Tax. It was argued by the counsel for the Op that in case Service Tax has Execution Application No. 102 of 2017 4 in Consumer Complaint No. 140 of 2016 been paid by the Op then the complainant can claim the service tax from the Department but no such document has been placed on the record by Ops to show that service tax was deposited with the Government. In case it was deposited, only depositor will have a right to get a refund."
4. It is clear from the abovesaid paragraph that Service Tax is to be paid by the complainant in case services were rendered by the Ops and in case services have not been rendered and any Service Tax has been deducted by the Ops from the account of the complainant then the Ops can claim the refund under the relevant provisions of the Service Tax Act and under Rules framed thereunder. Counsel for the decree holder argued that the complainant booked the flat with Ops/JDs and its possession was to be delivered within a specific time frame, which was not given by the JDs. In the LOI, there was clause that in case the possession of the flat is not offered within the prescribed period then the complainant has a right to ask for the refund alongwith interest @ 8% p.a. compounded annually and accordingly, the order of refund was passed. In case the flat has not been delivered to the complainant and the service tax has been deducted by the Ops, ultimately, the JDs are not to keep the flat with it because they are rendering construction services to the public in general. In case flat will be sold again to any other person they will be entitled to get a service tax from that consumer. Therefore, for one property they cannot claim service tax twice.
Execution Application No. 102 of 2017 5in Consumer Complaint No. 140 of 2016
5. The counsel for the Decree Holder has referred to the Circular No. 151/2/2012-ST dated 10.2.2012 issued by Government of India, Ministry of Finance, Department of Revenue and Clause 2.3 is relevant, which reads as under:-
"2.3 Investment model: In this model, before the commencement of the project, the same is on offer to investors. Either a specified area of construction is earmarked or a flat of a specified area is allotted to the investors and as it happens in some places, additionally the investor may also be promised a fixed rate of interest. After a certain specified period an investor has the option either to exit from the project on receipt of the amount invested alongwith interest or he can re-sell the said allotment to another buyer or retain the flat for his own use.
Clarification: In this model, after 1.7.2010, investment amount shall be treated as consideration paid in advance for the construction service to be provided by the builder / developer to the investor and the said amount would be subject to service tax. If the investor decides to exit from the project at a later date, either before or after the issuance of completion certificate, the builder/developer would be entitled to take credit under rule 6(3) of the Service Tax Rules, 1994 (to the extent he has refunded the original amount). If the builder/developer resells the flat before Execution Application No. 102 of 2017 6 in Consumer Complaint No. 140 of 2016 the issuance of completion certificate, again tax liability would arise."
Therefore, according to this circular, it is clear that in case the builder has deducted the service tax from the consumer to whom the services were not rendered, the builder / developer would be entitled to take credit under Rule 6(3) of the Service Tax Rules, 1994.
6. The counsel for the JDs has stated that they have filed additional affidavit on behalf of the appellant before the Hon'ble National and it be considered as arguments on behalf of the JDs in which it has been stated that Service Tax is to be collected by the JDs on account of services rendered under Section 66(E) and 65(
105)(zzzh) of the Finance Act, 1994 and has also referred to the judgment "Kuntal Debnath versus Director, Rdb Industries Limited" Revision Petition No. 1638 of 2014, decided on 12.8.2016 : SCC Online NCDRC 2045 wherein it was observed that appellants deposited the service tax with the appropriate authority, therefore, there is no illegality and irregularity or jurisdictional error and no justification to penalize the builder. In case they acted with bonafide intention. A reference has also been made to Section 66E of Finance Act, 1994, which reads as under:-
"66E. Declared Services.- The following shall constitute declared services, namely:--
(a) renting of immovable property;
(b) construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale Execution Application No. 102 of 2017 7 in Consumer Complaint No. 140 of 2016 to a buyer, wholly or partly, except where the entire consideration is received after issuance of completion-
certificate by the competent authority.
Explanation.- For the purposes of this clause,- (I) the expression "competent authority" means the Government or any authority authorized to issue completion certificate under any law for the time being in force and in case of non requirement of such certificate from such authority, from any of the following, namely:--
(A) architect registered with the Council of Architecture constituted under the Architects Act, 1972;
or (B) chartered engineer registered with the Institution of Engineers (India); or (C) licensed surveyor of the respective local body of the city or town or village or development or planning authority; (II) the expression "construction" includes additions, alterations, replacements or remodeling of any existing civil structure;
(c) temporary transfer or permitting the use or enjoyment of any intellectual property right;
(d) development, design, programming, customisation, adaptation, up-gradation, enhancement, implementation of information technology software;
(e) agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act;" Execution Application No. 102 of 2017 8
in Consumer Complaint No. 140 of 2016 It has been further stated that Central Government in its Budge of 2010-11 has imposed the Service Tax on all under construction properties from 1.7.2010. A reference has also been made to Section 65 [105] (zzzh), which reads as under:-
"Construction of Residential complex Definition of taxable services Any services provided or to be provided to any person by any other person in relation to construction of complex; Explanation - For the purpose of this sub-clause, construction of a complex which is intended for sale wholly or partially by a builder or any person authorized by the builder before during or after construction (except in cases for which no sum is received form or on behalf of the prospective buyer by the builder or a person authorized by the builder before the grant of completion certificate by the authority competent to issue such certificate under any laws for the time being in force) shall be deemed to be service provided by the builder to the buyer."
These Sections deals that in case the consumer has availed the construction service from the builder/developer, the consumer is liable to pay the Service Tax in view of the abovesaid provisions. There is no dispute with regard to the statutory provisions referred by the counsel for the JDs but these statutory provisions does not deal with the situation in case the consumer booked for construction services with Ops and Ops failed to render the services and the consumer had to go for refund, which was ordered Execution Application No. 102 of 2017 9 in Consumer Complaint No. 140 of 2016 by this Commission alongwith interest. Since the construction services were not rendered by the Ops, therefore, question of service tax does not arise and counsel for the JDs has also failed to rebut Rule 6(3) of the Service Tax Rules, 1994 under which in case the Investor decided to exit for want of deficiency in services on the part of developer/builder then the builder/developer will be entitled to take credit under Rule 6(3) of the Service Tax Rules, 1994, therefore, in para No. 7 of the order passed in the complaint, it was observed that Ops failed to render the services, therefore, consumer is not liable to pay the service tax and in case any service tax has been paid by the builder to the Competent Authority, he could have right to get its refund because only the depositor has a right to get the refund. Moreover, once this point has been observed by this Commission in its order in the complaint then as an Executing Court, jurisdiction of this Commission is very limited and this Commission cannot go beyond the order passed by it and moreover, in view of the statutory provisions as referred by the Hon'ble National Commission in its order dated 1.3.2018, the Ops has no right to charge the Service Tax from the Decree Holder in case the JDs have not rendered the construction services to the Decree Holder / Consumer and in case any amount has been deposited by the JDs with the Competent Authority, they have right to get its refund under Rule 6(3) of the Service Tax Rules, 1994.
7. There is an other preposition with regard to the TDS. A sum of Rs. 11,245/- was deducted as TDS on the interest by the JDs while making the payment. It has been argued by the counsel Execution Application No. 102 of 2017 10 in Consumer Complaint No. 140 of 2016 for the DHs that interest was not paid on account of deposit of any money borrowed or debt incurred, rather, it was made on account of compensation by utilizing the money of the Decree Holder for a sufficient period and in that eventuality the JDs have no right to deduct the TDS. In this regard, the counsel for the DHs has referred to the judgment 2004 (3) RCR (Civil) 658 "Ghaziabad Development Authority versus Balbir Singh" and extract of para No. 9 is relevant, which reads as under:-
"At this stage, it must be mentioned that the National Forum has, in its Judgment in Darsh Kumar's case (supra) stated that the interest at the rate of 18% per annum takes into consideration the escalation in the cost of construction as well. Even if that be so the compensation cannot be at a uniform rate. If the delay is only of one or two years the escalation in the cost of construction will not be as much as in a case where the delay is of five years or more. Therefore, if compensation has to be awarded for escalation in the costs of construction, it must be done under that head after taking into consideration the amount of delay.
Such compensation can be fixed on the basis of indexes of bodies like CPWD or PWD. Further, it must be noted that where a flat is allotted and possession given even though it is given belatedly there will be no question of escalation in the cost of construction." Execution Application No. 102 of 2017 11 in Consumer Complaint No. 140 of 2016 A reference has also been made to the judgment of the Hon'ble National Commission in "G.D.A. Versus Dr. N.K. Gupta", Revision Petition No. 2244 of 1999 decided on 18.9.2002 wherein after giving thought to the relevant provisions of the Income Tax Act i.e. Section 2(28A) & 2(28B) dealing with the meaning of interest, which has been reproduced as under:-
"2(28A) "interest" means interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilized.
2(28B) "interest on securities" means.---
(i) Interest on any security of the Central Government or a State Government.
(ii) Interest on debentures or other securities for money issued by or on behalf of a local authority or a company or a corporation established by a Central, State or Provincial Act."
Section 194A of the Income Tax Act reads as under:-
"194A Interest other than "Interest on securities" (1) Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any income by way of interest other than income (by way of interest on securities), shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of cheque or draft or by any other mode, Execution Application No. 102 of 2017 12 in Consumer Complaint No. 140 of 2016 whichever is earlier, deduct income-tax thereon at the rates in force."
It was observed that the complainant has not been awarded interest on the basis of any deposit made by the complainant or GDA being the borrower of any money of the complainant. The interest payment is by way of damages. Merely describing the damages by way of interest do not make them entitled to deduct TDS under the Income Tax Act and same view was held by the Hon'ble State Consumer Disputes Redressal Commission, U.T. Chandigarh in Execution Application No. 48 of 2015 in C.C. No. 188 of 2014, decided on 26.8.2015 "Mr. Brij Mohan Jain versus The Managing Director, M/s Shipra Estate Ltd. & Anr." and in an other Execution Application No. 38 of 2014 in C.C. No. 75 of 2010 decided on 12.9.2014 "Mr. Rajiv Malhotra & Ors. versus M/s Parsvnath Developers Ltd. & Ors.". A reference has also been made to the judgment of the Hon'ble High Court of Himachal Pradesh, Shimla in Income Tax Appeal No. 36 of 2006, decided on 28.11.2011 "Commissioner of Income-tax, Shimla versus M/s H.P. Housing Board, Shimla". After going through the relevant provisions of definition of interest as stated in Section 2(28A) and the 194A of the Income Tax Act, it was observed that allottee has not given the money to the Board by way of deposit nor had the Board borrowed the amount from the allottees. The amount was paid under a self financing scheme for construction of the flat and the interest was paid on account of damages suffered by the claimant for delay in completion of the flats. A reference has also Execution Application No. 102 of 2017 13 in Consumer Complaint No. 140 of 2016 been made to ITA No. 1739/Kol/2013 for Assessment Year :
2005-06 and other before Income Tax Appellate Tribunal, Bench 'B', Kolkata. In that Tribunal, after relying upon the judgment "CIT VS. H.P. Housing Board" (2012) 340 ITR 388 (HP) and "Ghaziabad Development Authority Vs. Dr. N.K. Gupta" 258 ITR 337, it was observed in para No. 5 as under:-
"5. We have carefully considered the rival submissions. The issue for consideration is as to whether the sum of Rs. 9,71,17,977/- which was a sum debited in the Profit and Loss account on account of obligation of the assessee to pay the allottees for the delay in delivery of possession of plots within the agreed time could be said to be interest. We have already noticed that there is no definition of interest u/s 194A of the Act which defines the expression "interest". In our view a reading the definition of interest u/s 2(28A) of the Act clearly presupposes borrowing of money or incurring of debt. In the present case as we have already seen the sum in question was paid by the assessee as per the terms of allotment of plots for the delay in delivery of plots. The liability of the assessee in this regard is a contractual liability. The quantification of the liability is in terms of percentage of interest payable by State Bank of India. The manner of quantification on the basis of percentage of interest paid by State Bank of India on term deposits will not make the sum in question as one in the nature of interest. In our opinion, there was neither borrowing or debt incurred by the assessee. The Execution Application No. 102 of 2017 14 in Consumer Complaint No. 140 of 2016 arguments of the Ld. DR that the expression "moneys borrowed or debt incurred" is further qualified by the word "claim" or other similar right or obligation and the liability of the assessee in question arises out of the claim made by an allottee of plot is also not acceptable. The expression "including a deposit, claim or other similar right or obligation"
has to be read ejusdem generis with the expression "moneys borrowed or debt incurred". In other words the expression "interest" should be traceable to transactions in the form of borrowing of money. The decisions referred to by the ld. Counsel for the assessee clearly lay down the preposition that the nature of payment for delay in delivery of the plots is in the nature of damages and not in the nature of interest. We, therefore, are of the view that the amount in question cannot be characterized as interest within the meaning of section 194A of the Act. Consequently there was no obligation on the part of the assessee to deduct tax at source. Consequently no disallowance could be made u/s 40(a)(ia) of the Act. We therefore direct the disallowance made by the AO and sustained by the CIT(A) should be deleted. Ground Nos. 1 and 2 raised by the assessee are accordingly allowed."
8. Whereas counsel for the JDs after referring the relevant provision of Section 2(28A) and Section 194A of the Income Tax Act and also referred to Section 19 of the PAPRA under the general liability of the allottee, under which he is liable to pay all the Execution Application No. 102 of 2017 15 in Consumer Complaint No. 140 of 2016 taxes levied from time to time by any Authority or under any law for the time being but counsel for the JD was unable to rebut the preposition whether the interest paid by the JDs on account of deficiency in services on their part will be interest as defined under Section 2(28A) and Section 194A of the Act. In view of the definition of the interest given under Section 2(28A) and 194A of the Income Tax Act and the judgments of the Hon'ble Supreme Court, Hon'ble National Commission, Hon'ble High Court of H.P. and the Income Tax Appellate Tribunal referred above that in case the allottee had deposited the amount with the Ops for rendering construction services and in case Ops failed to render the services and the amount was refunded alongwith interest, that does not come within the definition of the interest because the money was not paid by the JDs by way of deposit nor had the Ops borrowed the amount from the allottees. In these circumstances, the Ops are not liable to deduct the TDS on the interest paid by them as damages for not performing the services for the allottee and utilizing their money for a considerable time. The Hon'ble National Commission in another judgment I (2017) CPJ 1 (NC) "Ambrish Kumar Shukla & 21 Ors. Versus Ferrous Infrastructure Pvt. Ltd." observed that the amount of interest is paid to the allottees in case of deficiency in services on the part of Ops as compensation and it is to be included for the purpose of pecuniary jurisdiction. Therefore, in no way the amount refunded by the JDs on account of deficiency in their services cannot be categorized as interest but it will be categorized only as compensation and in those Execution Application No. 102 of 2017 16 in Consumer Complaint No. 140 of 2016 circumstances, the JDs are not competent and are not entitled to deduct the TDS. In case the TDS has been paid by the JDs to the Competent Authority, they have a right to get its refund because only the depositor has a right to seek for the refund. Accordingly, both the questions raised in the appeal filed by the Ops before the Hon'ble National Commission and the directions issued by the Hon'ble National Commission in its order dated 1.3.2018 are 'answered' as referred above in favour of the applicant/DHs.
9. In view of the above findings, JDs are directed to pay this amount deducted by them as Service Tax and TDS to the applicant/Decree Holder/complainant on or before 25.04.2018 by way of demand draft at his address mentioned in the Execution Application.
10. Copy of the order be sent to the parties free of cost.
(GURCHARAN SINGH SARAN) PRESIDING JUDICIAL MEMBER (RAJINDER KUMAR GOYAL) MEMBER April 04, 2018.
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