<p> After an Income Tax Department raid, the Central Excise and Service Tax (Bengaluru Zone) has ordered the recovery of service tax along with penalty of around Rs 120 crore from three developers engaged by Telecom Employees' House Building Co-operative Society (HBCS) in the city. <br /><br /></p>.<p>The department has levied hefty penalty on three developers – Rasasri Developers, Kanthi Properties and Raviteja Constructions – for evading tax while providing the service of acquisition of land and formation of layout for the society. In 2013, I-T department had raided the premises of three House Building Co-operative Societies, including Telecom Employees' House Building Co-operative Society, and claimed to have unearthed Rs 300 crore of undisclosed income.<br /><br />The society had entered into an unregistered Memorandum of Understanding with three developers with an agreement for purchase of lands, conversion, development and formation of sites. The society had released advance amounts to these firms who had purchased a large extent of lands from agriculturists and got it converted for non-agricultural purpose. <br /><br />On specific information, the Directorate General of Central Excise Intelligence officials had conducted searches at the premises of the developers and also the society. <br /><br />The enquiry revealed that despite society releasing money to developers in advance, the sale deeds were executed by the land owners in favour of the society and not between the society and the developers. On the other, the sale consideration towards the land was not paid by the society. <br /><br />It was also found during the enquiry that the amount released by the society towards the purchase of the land was not paid in full to the land owners. <br /><br />The Service Tax department came to the conclusion that the developers were acting as an intermediary between the land owners and the society. Hence, the amount, which is over and above the sale consideration paid to the land owners, was to be treated as service consideration and a taxable service as per the provisions of the Finance Act.<br /><br />The Department has confirmed the demand of Rs 12 crore service tax on Rasasri Developers with an equal amount of penalty (total Rs 24 crore) and Rs one lakh penalty on Anjaneyalu Prathipathi, Managing Director of Rasasri Developers. Similarly, department has ordered demand of service tax of Rs 30 crore on Raviteja Constructions with equal amount penalty and Rs 21 crore on Kanthi Properties with an equal amount of penalty along with Rs one lakh penalty on B Ravikumar Reddy, its Managing Director. The order stated that the heavy penalty was for the suppression of the facts to evade service tax. <br /><br />Depts in deep slumber<br /><br />For over five years Co-operation Department and Department of Stamps and Registration were sleeping over the complaint of violation of bye-laws and evasion of stamp duty respectively against the Telecom HBCS. While the central agencies have been swiftly taking action to recover the dues, the state agencies are still claiming to hold enquiries. <br /><br />A complaint was filed with the Stamps and Registration for recovery of stamp duty and registration charges for around Rs 250 crore. The Co-operation department, on the other hand, has not been able to take action against the society for financial irregularities and also violation of bye-laws.<br /><br /></p>
<p> After an Income Tax Department raid, the Central Excise and Service Tax (Bengaluru Zone) has ordered the recovery of service tax along with penalty of around Rs 120 crore from three developers engaged by Telecom Employees' House Building Co-operative Society (HBCS) in the city. <br /><br /></p>.<p>The department has levied hefty penalty on three developers – Rasasri Developers, Kanthi Properties and Raviteja Constructions – for evading tax while providing the service of acquisition of land and formation of layout for the society. In 2013, I-T department had raided the premises of three House Building Co-operative Societies, including Telecom Employees' House Building Co-operative Society, and claimed to have unearthed Rs 300 crore of undisclosed income.<br /><br />The society had entered into an unregistered Memorandum of Understanding with three developers with an agreement for purchase of lands, conversion, development and formation of sites. The society had released advance amounts to these firms who had purchased a large extent of lands from agriculturists and got it converted for non-agricultural purpose. <br /><br />On specific information, the Directorate General of Central Excise Intelligence officials had conducted searches at the premises of the developers and also the society. <br /><br />The enquiry revealed that despite society releasing money to developers in advance, the sale deeds were executed by the land owners in favour of the society and not between the society and the developers. On the other, the sale consideration towards the land was not paid by the society. <br /><br />It was also found during the enquiry that the amount released by the society towards the purchase of the land was not paid in full to the land owners. <br /><br />The Service Tax department came to the conclusion that the developers were acting as an intermediary between the land owners and the society. Hence, the amount, which is over and above the sale consideration paid to the land owners, was to be treated as service consideration and a taxable service as per the provisions of the Finance Act.<br /><br />The Department has confirmed the demand of Rs 12 crore service tax on Rasasri Developers with an equal amount of penalty (total Rs 24 crore) and Rs one lakh penalty on Anjaneyalu Prathipathi, Managing Director of Rasasri Developers. Similarly, department has ordered demand of service tax of Rs 30 crore on Raviteja Constructions with equal amount penalty and Rs 21 crore on Kanthi Properties with an equal amount of penalty along with Rs one lakh penalty on B Ravikumar Reddy, its Managing Director. The order stated that the heavy penalty was for the suppression of the facts to evade service tax. <br /><br />Depts in deep slumber<br /><br />For over five years Co-operation Department and Department of Stamps and Registration were sleeping over the complaint of violation of bye-laws and evasion of stamp duty respectively against the Telecom HBCS. While the central agencies have been swiftly taking action to recover the dues, the state agencies are still claiming to hold enquiries. <br /><br />A complaint was filed with the Stamps and Registration for recovery of stamp duty and registration charges for around Rs 250 crore. The Co-operation department, on the other hand, has not been able to take action against the society for financial irregularities and also violation of bye-laws.<br /><br /></p>