Transfer of development rights under Joint development agreement (JDA) distinct from sale of land.

 

When the Joint development agreement (JDA) is executed, the petitioner does not immediately acquire possession of the property.

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. Ownership rights do not transfer when development rights are transferred.

It is only after the completion of the project, issuance of completion certificate, the petitioner derives the right to sell the area of property which stood allotted to him for the realization of the amount of money invested by him in the course of execution of the JDA.

Where there is also a condition of cancelling the contract agreement and under such a situation; the entire rights over the said property would continue to remain with the landowners, this again would show that the right and title of the property even as on date stands vested with the landowners and not with the petitioner.

Thus, under no circumstances can the execution of the JDA or the mere transfer of development rights indicate an automatic transfer of ownership or title rights over any portion of land belonging to the landowner in favour of the petitioner/developer. 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.

Taking into account the provisions of Article 246A of the Indian Constitution, as well as the extraordinary powers conferred on the GST Council, on whose recommendation the Government issued the notification clarifying the aspect of transfer of development rights attracted to GST/TGST, the challenge to the notification issued by the Government of India can be safely held to be devoid of merits.

The copy of the order is as under:

Prahitha-Constructions-Private-Limited-Vs-Union-of-India-Telangana-High-Court (1) (1)