| S.No | Name | Date of Order | Subject | Actions |
|---|---|---|---|---|
| 1 | BirlaNu Ltd. (ISD) vs. Union of India & Ors. | 30-12-2026 | Validity of Rule 39(1)(a) of CGST Rules, 2017 – Distribution of Input Tax Credit by Input Service Distributor – Section 20 of the CGST Act, 2017 and Penalty under Section 122(1)(ix) of the CGST Act, 2017. | View Download |
Facts:The petitioner, registered as an Input Service Distributor (ISD), accumulated Input Tax Credit during FY 2017-18 and 2018-19 and distributed the credit in March instead of distributing it month-wise. During audit, the department alleged violation of Rule 39(1)(a) of the CGST Rules which requires ITC available in a month to be distributed in the same month and issued a show cause notice proposing penalty of ₹8,38,67,332 under Section 122(1)(ix) of the CGST Act. The petitioner challenged the constitutional validity of Rule 39(1)(a) and the consequential proceedings.Court Decision:The High Court held that Section 20 of the CGST Act, as it stood prior to 01.04.2025, did not prescribe any time limit for distribution of Input Tax Credit by an Input Service Distributor. Rule 39(1)(a), by mandating that the credit available in a month must be distributed in the same month, introduced a substantive restriction not contemplated under the parent statute.The Court held that the rule-making authority cannot impose a limitation period through delegated legislation when the parent statute does not provide for such limitation. Consequently, Rule 39(1)(a) of the CGST Rules, to the extent it mandates distribution of ITC in the same month, was declared ultra vires Section 20 of the CGST Act.The Court further held that the audit proceedings and show cause notice were also vitiated due to violation of principles of natural justice and improper invocation of extended limitation when all details were disclosed in GST returns. Accordingly, Rule 39(1)(a) was struck down to that extent and the final audit report dated 22.01.2024 and show cause notice dated 30.01.2024 along with consequential proceedings were quashed.Cases Referred by Court:• Lakshmi Rattan Engineering Works Ltd. vs. CST• Sales Tax Officer vs. K. I. Abraham• Global Energy Ltd. vs. Central Electricity Regulatory Commission• Kunj Behari Lal Butail vs. State of H.P.• Kirloskar Brothers Ltd. vs. State of Jharkhand• Bharat Barrel and Drum Manufacturing Company Ltd. vs. ESI Corporation• Pushpam Pharmaceuticals Company vs. CCE | ||||
| BirlaNu Ltd. (ISD) vs. Union of India & Ors. 30-12-2026 Validity of Rule 39(1)(a) of CGST Rules, 2017 – Distribution of Input Tax Credit by Input Service Distributor – Section 20 of the CGST Act, 2017 and Penalty under Section 122(1)(ix) of the CGST Act, 2017.Facts:The petitioner, registered as an Input Service Distributor (ISD), accumulated Input Tax Credit during FY 2017-18 and 2018-19 and distributed the credit in March instead of distributing it month-wise. During audit, the department alleged violation of Rule 39(1)(a) of the CGST Rules which requires ITC available in a month to be distributed in the same month and issued a show cause notice proposing penalty of ₹8,38,67,332 under Section 122(1)(ix) of the CGST Act. The petitioner challenged the constitutional validity of Rule 39(1)(a) and the consequential proceedings.Court Decision:The High Court held that Section 20 of the CGST Act, as it stood prior to 01.04.2025, did not prescribe any time limit for distribution of Input Tax Credit by an Input Service Distributor. Rule 39(1)(a), by mandating that the credit available in a month must be distributed in the same month, introduced a substantive restriction not contemplated under the parent statute.The Court held that the rule-making authority cannot impose a limitation period through delegated legislation when the parent statute does not provide for such limitation. Consequently, Rule 39(1)(a) of the CGST Rules, to the extent it mandates distribution of ITC in the same month, was declared ultra vires Section 20 of the CGST Act.The Court further held that the audit proceedings and show cause notice were also vitiated due to violation of principles of natural justice and improper invocation of extended limitation when all details were disclosed in GST returns. Accordingly, Rule 39(1)(a) was struck down to that extent and the final audit report dated 22.01.2024 and show cause notice dated 30.01.2024 along with consequential proceedings were quashed.Cases Referred by Court:• Lakshmi Rattan Engineering Works Ltd. vs. CST• Sales Tax Officer vs. K. I. Abraham• Global Energy Ltd. vs. Central Electricity Regulatory Commission• Kunj Behari Lal Butail vs. State of H.P.• Kirloskar Brothers Ltd. vs. State of Jharkhand• Bharat Barrel and Drum Manufacturing Company Ltd. vs. ESI Corporation• Pushpam Pharmaceuticals Company vs. CCE | ||||
| 2 | Prahitha Construction — GST on Transfer of Development Rights under JDA | 09-02-2024 | Whether transfer of Development Rights (TDR) by a landowner to a developer under a Joint Development Agreement (JDA) amounts to sale of land exempt under Entry 5 of Schedule III of the CGST Act, 2017, or constitutes a taxable supply of service under GST � | View Download |
BackgroundPrahitha Construction Pvt. Ltd., a commercial real estate developer, entered into a JDA dated 28.12.2017 with two landowners — M/s. Jitvan Land Limited and M/s. Janina Marine Properties Pvt. Ltd. — for development of land admeasuring 8.30 acres and 1.82 acres at Hyderabad Knowledge City, Raidurg Village, Serilingampally Mandal, Ranga Reddy District, Telangana into an IT/ITES and commercial office project. Under the JDA, the landowners granted permissive possession to the developer, who agreed to construct three towers. The developer was to receive the Developer's Undivided Share (UDS) of land and the built-up area as consideration, but only after handing over the Landowner's Share upon project completion. The JDA expressly stated that permissive possession shall not be construed as delivery of possession in part performance under Section 53-A of the Transfer of Property Act, 1882. The petitioner challenged Notification No. 4/2018 as amended by Notification No. 23/2019-CT(Rate) dated 30.09.2019, which imposed GST on transfer of development rights under a JDA, seeking its declaration as ultra vires Articles 14, 246A and 265 of the Constitution and the CGST/TGST Act, 2017.Court Observations (Verbatim)"Reading of the aforesaid clause further gives a clear picture of the fact that mere execution of JDA by itself would not mean that the right, title and ownership of the property or a portion of that property stands transferred in the name of the petitioner/developer. There are certain conditions/milestones/stages which have to be crossed before which the petitioner would be entitled to have a certain element of right over the completed constructed area which has been agreed to be left at the disposal of the petitioner. But that does not mean that mere execution of the JDA would amount to transfer of right to the petitioner.""The transfer of development rights is hence a service under GST Law which the landowner is offering to the developer and that too for a consideration. Thus, the transfer of development rights is a service and not an outright sale of an immovable property.""From plain reading of the JDA that was entered into between the two parties, what is apparently visible is that, there was no outright sale of land being effectuated and the JDA per se cannot be considered merely as a medium adopted by the landowner selling his land and the JDA does not lead to sale of land by itself.""The transfer of ownership from the landowner goes directly to the purchaser of the constructed property and not in favour of the petitioner unless and until the land stands transferred in the name of the petitioner. The same cannot be brought within the ambit of sale. Transferring of the development rights does not result in transfer of ownership rights. That the sale of land/transfer of land or undivided share of land would get executed only after issuance of completion certificate of the project. This itself would give a clear indication that the services rendered by the petitioner in execution of JDA was supplied prior to the issuance of completion certificate and would thus be amenable to GST.""On conjoint reading of the clauses under JDA, clause d of the JDA along with clause 2.2, 2.3, 2.4, 6.1, 6.7 and 23.4...it will clearly indicate that there is no automatic transfer of ownership given to the petitioner at the time of execution of the JDA...In the absence of any cogent and substantial material to establish right, title and ownership being created in favour of the petitioner/developer, the transfer of development rights as it stands is amenable to GST and cannot be brought within the purview of Entry 5 of Schedule-III of the GST Act.""The Notification No. 4 of 2018 dated 25.01.2018 as amended by Notification No. 23/2019-Central Tax (Rate), dated 30.09.2019, on its plain reading would reveal that it is not with which there is a charge created on the transfer of development rights, but in fact only provide for the time when the tax need to be paid.""Taking into consideration the provisions of Article 246A of the Constitution of India and also considering the extraordinary powers which have been conferred upon the GST Council and upon whose recommendation the Government has issued the notification clarifying the aspect of transfer of development rights being attracted to GST/TGST, the challenge to the notification issued by the Government of India can be safely held to be devoid of merits."Final VerdictThe Writ Petition was dismissed. The Court held that transfer of development rights under a JDA is a taxable supply of service under GST and does not amount to sale of land under Entry 5 of Schedule III of the CGST Act. The impugned Notification No. 23/2019-CT(Rate) dated 30.09.2019 was upheld as valid. | ||||
| Prahitha Construction — GST on Transfer of Development Rights under JDA 09-02-2024 Whether transfer of Development Rights (TDR) by a landowner to a developer under a Joint Development Agreement (JDA) amounts to sale of land exempt under Entry 5 of Schedule III of the CGST Act, 2017, or constitutes a taxable supply of service under GST �BackgroundPrahitha Construction Pvt. Ltd., a commercial real estate developer, entered into a JDA dated 28.12.2017 with two landowners — M/s. Jitvan Land Limited and M/s. Janina Marine Properties Pvt. Ltd. — for development of land admeasuring 8.30 acres and 1.82 acres at Hyderabad Knowledge City, Raidurg Village, Serilingampally Mandal, Ranga Reddy District, Telangana into an IT/ITES and commercial office project. Under the JDA, the landowners granted permissive possession to the developer, who agreed to construct three towers. The developer was to receive the Developer's Undivided Share (UDS) of land and the built-up area as consideration, but only after handing over the Landowner's Share upon project completion. The JDA expressly stated that permissive possession shall not be construed as delivery of possession in part performance under Section 53-A of the Transfer of Property Act, 1882. The petitioner challenged Notification No. 4/2018 as amended by Notification No. 23/2019-CT(Rate) dated 30.09.2019, which imposed GST on transfer of development rights under a JDA, seeking its declaration as ultra vires Articles 14, 246A and 265 of the Constitution and the CGST/TGST Act, 2017.Court Observations (Verbatim)"Reading of the aforesaid clause further gives a clear picture of the fact that mere execution of JDA by itself would not mean that the right, title and ownership of the property or a portion of that property stands transferred in the name of the petitioner/developer. There are certain conditions/milestones/stages which have to be crossed before which the petitioner would be entitled to have a certain element of right over the completed constructed area which has been agreed to be left at the disposal of the petitioner. But that does not mean that mere execution of the JDA would amount to transfer of right to the petitioner.""The transfer of development rights is hence a service under GST Law which the landowner is offering to the developer and that too for a consideration. Thus, the transfer of development rights is a service and not an outright sale of an immovable property.""From plain reading of the JDA that was entered into between the two parties, what is apparently visible is that, there was no outright sale of land being effectuated and the JDA per se cannot be considered merely as a medium adopted by the landowner selling his land and the JDA does not lead to sale of land by itself.""The transfer of ownership from the landowner goes directly to the purchaser of the constructed property and not in favour of the petitioner unless and until the land stands transferred in the name of the petitioner. The same cannot be brought within the ambit of sale. Transferring of the development rights does not result in transfer of ownership rights. That the sale of land/transfer of land or undivided share of land would get executed only after issuance of completion certificate of the project. This itself would give a clear indication that the services rendered by the petitioner in execution of JDA was supplied prior to the issuance of completion certificate and would thus be amenable to GST.""On conjoint reading of the clauses under JDA, clause d of the JDA along with clause 2.2, 2.3, 2.4, 6.1, 6.7 and 23.4...it will clearly indicate that there is no automatic transfer of ownership given to the petitioner at the time of execution of the JDA...In the absence of any cogent and substantial material to establish right, title and ownership being created in favour of the petitioner/developer, the transfer of development rights as it stands is amenable to GST and cannot be brought within the purview of Entry 5 of Schedule-III of the GST Act.""The Notification No. 4 of 2018 dated 25.01.2018 as amended by Notification No. 23/2019-Central Tax (Rate), dated 30.09.2019, on its plain reading would reveal that it is not with which there is a charge created on the transfer of development rights, but in fact only provide for the time when the tax need to be paid.""Taking into consideration the provisions of Article 246A of the Constitution of India and also considering the extraordinary powers which have been conferred upon the GST Council and upon whose recommendation the Government has issued the notification clarifying the aspect of transfer of development rights being attracted to GST/TGST, the challenge to the notification issued by the Government of India can be safely held to be devoid of merits."Final VerdictThe Writ Petition was dismissed. The Court held that transfer of development rights under a JDA is a taxable supply of service under GST and does not amount to sale of land under Entry 5 of Schedule III of the CGST Act. The impugned Notification No. 23/2019-CT(Rate) dated 30.09.2019 was upheld as valid. | ||||
