2014 (7) TMI 196 - HC - VAT and Sales Tax

Development of residential complexes - Works contract - Whether the activities, with which the revisionist is involved, would attract or not attract the provisions of the Uttarakhand VAT Act, 2005 - Revenue contends that land, upon which, such residential complexes would be constructed belongs to it; it has obtained necessary sanction to construct thereon and that it proposes to sell the constructed area - Held that - No sooner a sale is effected, the provisions of the Act will become applicable and, accordingly, tax will be levied. Sale has been defined in Sub Section (40) of Section 2 of the Act, which clearly mentions that sale means any transfer of property in goods. Sale of goods being a sine qua non for application of the Act, as clarified in Sub Section (55) of Section 2 of the Act, such sale will include an agreement for carrying out construction of immovable property or commissioning of any immovable property. In other words, a person agreeing with another person to make a construction for a valuable consideration will be selling the construction made by him as goods covered by the Act, but a person, if he sells an immovable property after the same has been constructed, he will not be selling goods attracting the provisions of the Uttarakhand VAT Act, 2005. Matter remanded back to find out what is the object of the business of the revisionist, i.e. whether it is engaged in sale of immovable properties in the form of flats, apartments, etc. or it is undertaking construction of flats, apartments, etc. on behalf of others - Decided in favour of assessee.

Summary

Issues:
1. Interpretation of Section 3 of the Uttarakhand VAT Act, 2005 regarding the applicability of tax on sale of immovable property.
2. Determining whether the activities of the revisionist, involving development of residential complexes, attract the provisions of the Uttarakhand VAT Act, 2005.

Analysis:
1. The judgment addresses the interpretation of Section 3 of the Uttarakhand VAT Act, 2005, which states that tax shall be levied on every sale made within the state by a dealer or a person. The definition of "sale" in Sub Section (40) of Section 2 includes any transfer of property in goods. Additionally, Sub Section (55) of Section 2 defines "Work Contract" to include various activities related to construction and immovable property. The judgment clarifies that a sale of goods is essential for the Act to apply, and an agreement for construction of immovable property falls under the Act. However, selling an already constructed immovable property does not attract the provisions of the VAT Act.

2. The case involved an Application under Section 57 of the Uttarakhand VAT Act, 2005 seeking an opinion on whether the revisionist's activities, which include the development of residential complexes, fall under the Act. The revisionist planned to sell the constructed area after obtaining necessary sanctions. The Commissioner and the Appellate Authority opined that the revisionist's activities attract the provisions of the VAT Act. The High Court remitted the matter back to the Commissioner to determine if the revisionist is engaged in selling immovable properties or undertaking construction on behalf of others. The decision will be based on whether the revisionist is selling immovable properties or constructing them for valuable consideration.

In conclusion, the judgment provides a detailed analysis of the interpretation of relevant sections of the Uttarakhand VAT Act, 2005 and clarifies the application of tax on the sale of immovable property. It highlights the distinction between selling an already constructed immovable property and entering into agreements for construction activities. The decision emphasizes the need to determine the nature of the revisionist's business to ascertain the applicability of the VAT Act based on the law declared in the judgment.