2010 (11) TMI 888 - HC - VAT and Sales Tax

Whether the document of exchange amounts only exchange of nature put forth by the learned counsel for the appellant or terms of exchange deed amount to something else which would attract the ingredients of transaction of sale? Held that - Subsequent to amendment to article 366 by insertion of clause (29A) the authorities have to consider the material with reference to clause (29A) of article 366 of the Constitution because deemed sale is introduced by virtue of this provision. Therefore by looking to the terms of the exchange deed and also other material including the large payments made to the registered dealers by the appellant whether it amounts to a sale or deemed sale as contemplated under clause (29A) of article 366 of the Constitution or it remains only an exchange of built up area for undivided interest in the land handed over to the developer the authorities concerned will have to examine the same and also they have to see and examine whether the works contract as contended by the appellant was executed by registered dealers or whether the construction was taken up by the appellant himself and therefore element of sale is involved by virtue of deemed sale. Hence the order of remand made by the revisional authority is affirmed. With these observations we dispose of the present appeal remanding the matter to the assessing authority.

Summary

Issues:
1. Jurisdictional bar for revision proceedings during pending appeals before Karnataka Appellate Tribunal.
2. Properness of remanding matter to assessing authority regarding built-up area in software technology park.
3. Tax liability on exchange of built-up area for undivided interest in land.
4. Reliance on judgment for determining transaction as 'sale' liable for sales tax.
5. Double taxation issue regarding deduction of amounts paid to registered sub-contractors.

Analysis:
1. The appellant, a property developer, entered into a Joint Development agreement with landowners to develop a software technology park. A dispute arose regarding the tax liability under the Karnataka Value Added Tax Act, 2003. The assessing authority held the transaction as a deemed sale due to the transfer of built-up area to landowners. The appellant contended no sale occurred as no money was exchanged, and construction works were handled by registered sub-contractors.

2. The appellant appealed the assessing authority's decision, and the appellate authority ruled in favor of the appellant, emphasizing the absence of monetary consideration for a sale transaction. The appellate authority accepted the appellant's arguments and distinguished the case law cited by the assessing authority.

3. Subsequently, the revisional authority initiated suo motu revisional proceedings and issued a show-cause notice to the appellant, proposing a different interpretation regarding the transaction. The revisional authority disagreed with the appellant's defense and directed a re-examination by the assessing authority, leaving open the possibility of penalty and interest.

4. The exchange deed between the developer and landowners was produced during submissions, revealing additional details not previously considered by the authorities. The first appellate authority's decision, based on specific legal principles, was not thoroughly reviewed by the revisional authority, which relied on a different judgment.

5. Ultimately, the revisional authority directed the assessing authority to verify all relevant documents and materials to determine the nature of the transaction accurately. The matter was remanded back to the assessing authority for a comprehensive review, allowing both parties to present their arguments without being influenced by the observations made during the proceedings. The focus was on determining whether the transaction constituted a sale or a deemed sale under the relevant legal provisions.