HC allows builders to deposit service tax in court

Mumbai, Feb 24 (PTI) Hearing a petition filed by the apexbody of real estate developers, the Bombay High Court hasallowed the builders to deposit service tax collected frombuyers of under construction structures directly in the courtinstead of putting the same in an escrow account.

The service tax thus deposited in the High Court would berefunded to the members of Maharashtra Chambers of HousingIndustry (MCHI) along with accrued interest thereon if thedecision goes in favour of the builders who have challengedthe levy of service tax imposed by the Union Government.

Justice J P Devdhar and Justice Mridula Bhatkar onFebruary 18, modified the High Court''s earlier ruling byasking the developers to deposit the service tax in the court.

Earlier, the Court has asked developers to give anundertaking that they would deposit service tax collected fromthe buyers in an escrow account.

MCHI had filed an intervening application seeking todeposit the service tax in the court directly instead ofputting the amount in the escrow account.

MCHI and other builders'' bodies had filed petitionschallenging the constitutional validity of Finance Act 2010,seeking to amend the Finance Act 1994, introducing anexplanation to section 65 (105) (zzq) and 65 (105) (zzzh) tointroduce the Service Tax concept of "Deemed Service" for anycommercial or industrial construction of residential complexdone prior to obtaining completion certificate.

The division bench of the Bombay High Court comprisingJustice V C Daga and Justice S J Kathawala had admitted thepetition filed by the MCHI and others on July 23 last year andgranted interim stay until further hearing. (More) PTI SVS VKV