Supreme Court Rules Land Sale Transactions Not Taxable as ‘Real Estate Agent’ Services—No Service Tax, No Extended Limitation

Case Name: Commissioner of Service Tax v. M/s Elegant Developers
Citation: Civil Appeal Nos. 11744–11745 of 2025; 2025 INSC 1299
Date of Judgment/Order: 10 November 2025
Bench: Hon’ble Mr. Justice J.B. Pardiwala & Hon’ble Mr. Justice Sandeep Mehta

Held: The Supreme Court held that the land procurement arrangements between Elegant Developers and Sahara India (SICCL) were pure sale transactions and did not constitute “real estate agent” or “real estate consultant” services under Sections 65(88), 65(89), or 65(105)(v) of the Finance Act, 1994. Since the respondent acted on a principal-to-principal basis, earning only the profit margin between negotiated land price and fixed average rate, no element of service, consultancy, commission, or agency existed. The Court further held that the transactions fell squarely within the statutory exclusion under Section 65B(44)(a)(i) (transfer of title in immovable property), and therefore no service tax liability could arise. On limitation, the Court held that the revenue failed to establish any wilful suppression or intent to evade tax; hence, invocation of extended limitation under Section 73(1) proviso was impermissible.

Summary: Elegant Developers entered into MOUs with Sahara India Commercial Corporation Ltd. for identifying, negotiating, procuring, documenting, and arranging registration of large parcels of land across Vadodara, Sri Ganganagar, and Kurukshetra. Sahara paid a fixed average rate per acre; Elegant Developers negotiated actual prices with landowners, earned profits or losses on the differential, and bore certain operational responsibilities. The DGCEI initiated investigation and issued a show-cause notice demanding over ₹10.45 crore in service tax for 2004–2007, treating Elegant Developers as a “real estate agent.” The Commissioner confirmed the demand, interest, and penalties, invoking extended limitation. On appeal, CESTAT set aside the demand, holding that the transactions were outright land sales, lacking any element of service or commission. Before the Supreme Court, the revenue argued that the respondent acted merely as a facilitator for SICCL and the margin constituted consideration for services. Elegant Developers contended that it bore the commercial risk, acted as an independent trader, and transferred title directly to SICCL, bringing the transactions within the explicit statutory exclusion. The Supreme Court undertook a detailed reading of the MOUs and statutory definitions, concluding that agency was absent, the respondent bore commercial risk, and profit arose from trading, not service. The Court relied on its precedents, including Future Gaming Solutions and Stemcyte India Therapeutics, to reaffirm the boundaries of “service” and the strict requirements for extended limitation.

Decision: The Supreme Court dismissed the appeals, upholding the CESTAT’s order and confirming that Elegant Developers’ activities constituted sale of immovable property, not taxable “real estate agent” services. It held that the DGCEI’s invocation of extended limitation lacked factual basis since all transactions were bank-recorded, and no suppression or intent to evade tax was established. Consequently, the demands, interest, and penalties imposed by the Commissioner were set aside, and the respondent was held not liable to service tax for the period in question.