Introduction:

Development agreements are popular not only with respect to the construction of residential or commercial complexes but also with respect to laying and development of plots. The real estate companies enter into agreements with landowners for the purpose of laying of plots and undertaking various development works viz. compound wall, approach roads, parks, plantation, street lighting, drainage/sewerage facilities etc. In consideration for undertaking these activities, the developer is generally entitled to a portion of the developed plots. The landowner is entitled to sell the remaining portion of the developed plots. Let us understand the GST[1]implications in connection with these arrangements. Typically, every joint development agreement gives raise to four transactions for which the tax impact has to be understood:

Read more: GST Implications on Developemnt of Plots - Dec 2020

Section 171 of the CT Act[1] provides for anti-profiteering measures owing to the introduction of GST laws in India. The said section was a last-minute inclusion as it was missing in the model GST laws that were released for stakeholders’ consultation. Moreover, section 171 is not exhaustive and is only an enabling section which provides for the meaning and scope of profiteering and conferred powers on Central Government for constitution of Anti-Profiteering Authority for implementation of the said section. However, there were no general or industry-specific guidelines laid down on manner in which profiteering amounts are required to be determined for pass on to customers.

In the absence of such guidelines, taking measures to avoid profiteering became very difficult and complex especially in sectors like real estate. In this article, an effort is made to bring certain practical insights of compliance with anti-profiteering measures to be undertaken by builders in real estate sector and position laid down several rulings pronounced by National Anti-Profiteering Authority.

Read more: Anti Profiteering vis -a-vis Real Estate Sector - Practical Insights

The recent judgment of ITAT[1] Mumbai in the matter of Reliance Jio Infocomm Limited[2] (for brevity ‘Jio India’) is one of a classic judgment in dealing with the interpretation of phrases/expression that are used in DTAA[3] but which are not defined therein. In this article, we try to summarise the key findings of the said judgement.

Before we proceed to analyse and note the key findings, a peek into the facts of the matter involved is warranted. Jio India has a bandwidth services agreement with Reliance Jio Infocomm Pte Limited (for brevity ‘Jio Singapore’) and against such agreement Jio India has remitted a payment of US $ 15,91,520. While making such payment Jio has withheld tax under Section 195 of IT Act[4]. Jio India post payment of tax has filed an application before CIT(A)[5] under Section 248 praying for a declaration to the effect that such tax need not be withheld on the payments made to Jio Singapore.

Read more: Interpretation of Article 3(2) - Significance of phrase ‘Term’

Income Tax Act, 1961, as amended from time to time, has provided for tax rates applicable to the companies. From viewpoint of tax rate, the companies be classified into ‘domestic company[1]’ and ‘foreign company[2]’.

In this article we analyse the rate of income tax payable by ‘domestic company’ in light of changes brought into Taxation Laws (Amendment) Ordinance 2019.

Read more: Tax Rate Changes for Domestic Companies