• Dated 25^th August, 2025

No Double Taxation on Landowner under Joint Developer Agreement, Karnataka HC Quashes GST Demand Where Developer Already Discharged Liability

BRIEF FACTS:

The petitioner, being the landowner, entered into a Joint Development Agreement (JDA) dated 06.02.2017 with M/s. DivyaSree R.O.W. Projects Pvt. Ltd. for the development of its land into residential apartments. Under the arrangement, the developer undertook construction and discharged the entire GST liability for the project, including both its own 70% share and the petitioner's 30% share. Despite this, the Deputy Commissioner of Commercial Taxes (Audit) passed an order dated 30.12.2023 holding that since the JDA was an unregistered document and did not create or transfer any rights, the petitioner as landowner was liable to pay GST on 100% of the property. This resulted in to a situation where, although the developer had already paid the tax, a fresh demand was raised against the landowner for the same liability, thereby leading to double taxation.

ASSESSEE'S CONTENTION:

The Assessee, contended that the entire GST liability on the project, including the landowner's 30% share, had already been discharged by the developer before the adjudication order passed against it. Therefore, raising a fresh demand on the landowner would amount to impermissible double taxation. It was further submitted that the Department itself, in earlier proceedings against the developer, had recognized and acted upon the Joint Development Agreement (JDA) while fastening the liability on the developer and accepting payment therefrom. Having already accepted the JDA for this purpose, the Department was estopped from subsequently taking a contradictory stand that the JDA was unregistered and could not be relied upon to exempt the landowner. Hence, the impugned order demanding tax again from the petitioner was erroneous, unsustainable, and liable to be quashed.

DEPARTMENT'S CONTENTION :

The Department contended that the Joint Development Agreement (JDA) entered into between the petitioner and the developer was an unregistered document and, therefore, could not be relied upon to exempt the landowner from GST liability. It was argued that since the JDA was neither registered under the Registration Act nor stamped as required under the Karnataka Stamp Act, it did not have the effect of creating, transferring, or assigning any rights in favour of the developer. Consequently, the Department maintained that the construction activity was essentially undertaken for the landowner, who continued to be the principal, and that the developer merely acted as an agent without any independent rights. On this basis, the Department concluded that the petitioner, being the landowner, was liable to discharge GST on the entire value of construction and the impugned demand raised was valid and enforceable.

DECISION:

The Karnataka High Court held in favour of the assessee, observing that once the developer had already discharged the entire GST liability for the project, including the landowner's share, raising a further demand on the landowner would result in impermissible double taxation. The Court rejected the Department's contention that the unregistered Joint Development Agreement (JDA) could not be relied upon, noting that the Department itself had earlier recognized and acted upon the same JDA while fastening liability on the developer and accepting tax payments. It ruled that the Department was estopped from taking a contradictory stand at a later stage. Accordingly, the Court quashed the impugned adjudication order dated 30.12.2023 and the related GST DRC-07 demand notice, thereby granting relief to the petitioner.

BTA's COMMENT:

The ruling reinforces the principle that once GST liability on a project has been fully discharged by the developer under a Joint Development Agreement, the Department cannot demand tax again from the landowner, as such action would lead to double taxation. It also emphasizes that the Revenue, having already accepted and acted upon the JDA for fastening liability on the developer, is estopped from subsequently questioning its validity on the ground of non-registration. This judgment provides significant relief to landowners in similar joint development arrangements by ensuring that tax cannot be collected twice on the same transaction.

Case Reference: Shyamaraju and Co. (India) Pvt. Ltd. v. Deputy Commissioner of Commercial Taxes (Audit), Bangalore (2025) 33 Centax 223 (Kar.)

Author: Madhurima Bose

Edited by: Shaily Gupta