9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2014 (10) TMI 765 - HC - VAT and Sales TaxNature of activity - Works Contract or contract of sale or contract of service - imparting computer education in the schools - petitioner had provided computers and software for teaching purpose - Whether the contract dated 29.6.2002 can be construed and interpreted as a works contract within the meaning of Section 2 (1) (f) of APGST Act, 1957 and whether it is exigible to tax under Section 5-F of the said Act - Held that - On a careful analysis of the recitals and terms and conditions of the contract dated 29.06.2002, there cannot be any doubt that it involves certain goods in execution of the contract and that the same would be transferred to the schools in which the equipment is installed for imparting the computer education. It is no doubt true that the ownership of the said equipment remains with the petitioner till the end of the contract. However the mere fact that the ownership of the computers and the accessories passed on to the respondent at the end of the contract does not alter the nature of the contract. Passing of ownership at a later point of time is permissible as held in Larsen and Toubro Limited s case 2013 (9) TMI 853 - SUPREME COURT On a combined reading of the terms and conditions of the contact dated 29.6.2002 with reference to the object sought to be achieved, it appears to us that the contract in question involves both a contract of service and a contract of sale of goods. It is a composite contract and by legal fiction provided under Article 366 (29-A) (b) of the Constitution it is permissible to separate the transfer of property in goods (as goods or in some other form) from the contract of service. It is also explained in Larsen and Toubro Limited s case (2013 (9) TMI 853 - SUPREME COURT) that the term works contract cannot be confined to a particular form and it encompasses a wide range of many varieties of contract. It is also laid down in the said decision that for sustaining the levy of tax on the goods deemed to have been sold in execution of a works contract three conditions must be fulfilled namely (i) there must be a works contract, (ii) the goods should have been involved in the execution of a works contract, and (iii) the property in those goods must be transferred to a third party either as goods or in some other form. According to us, all the said three conditions are satisfied in the present case - Decided against Assessee.
Issues Involved:
1. Whether the contract dated 29.6.2002 can be construed and interpreted as a 'works contract' within the meaning of Section 2 (1) (f) of the APGST Act, 1957. 2. Whether the turnover of property involved in the execution of the said works contract is liable to be taxed at 8% under Section 5F of the APGST Act, 1957. Issue-wise Detailed Analysis: 1. Interpretation of the Contract as a 'Works Contract': The core issue was whether the contract dated 29.6.2002 for imparting computer education in schools, including the leasing of computer hardware, software, and accessories on a Build Own Operate Transfer (BOOT) basis, qualifies as a 'works contract' under Section 2(1)(f) of the APGST Act, 1957. The petitioner argued that the contract was purely for providing computer education and did not involve the sale of goods. They contended that the provision of computers and software was incidental to the primary objective of imparting education and did not constitute a sale. Conversely, the respondents maintained that the contract, being on a BOOT basis and involving the provision of computers, software, and accessories, inherently included the transfer of property. They argued that the petitioner was paid for both the educational services and the eventual transfer of equipment, thus constituting a works contract. The court analyzed the terms and conditions of the contract, including the preamble and specific clauses, which highlighted the provision, installation, and maintenance of computer equipment and software for a period of five years. The contract also stipulated the transfer of these assets to the government at the end of the contract period without additional consideration. The court referred to several precedents, including the Supreme Court's decisions in Builders' Association of India v. Union of India, Gannon Dunkerley and Co. v. State of Rajasthan, and Larsen and Toubro Limited v. State of Karnataka. These cases established that a works contract could be divided into a contract for the sale of goods and a contract for services, and that the transfer of property in goods involved in the execution of a works contract is taxable. The court concluded that the contract in question involved both the provision of services and the transfer of property in goods, thus satisfying the criteria for a works contract. The dominant intention of the contract being to impart computer education did not preclude it from being classified as a works contract, as the transfer of property in goods was an integral part of the contract. 2. Taxability under Section 5F of the APGST Act: The next issue was whether the turnover of property involved in the execution of the works contract was liable to be taxed at 8% under Section 5F of the APGST Act, 1957. Section 5F of the APGST Act mandates a tax on the transfer of property in goods involved in the execution of a works contract at the rate of 8% of the turnover. The court examined the definition of 'works contract' under Section 2(1)(t) of the APGST Act, which includes any agreement for carrying out construction, installation, or other specified works for consideration. The court reiterated that the contract involved the transfer of property in goods, specifically the computers and accessories installed in the schools, which were to be handed over to the government at the end of the contract period. This transfer of property, even if it occurred at the end of the contract, fell within the ambit of a works contract as defined under the APGST Act. The court also noted that the taxability of such contracts had been upheld in various judicial pronouncements, including the landmark decision in Larsen and Toubro Limited v. State of Karnataka, which clarified that the transfer of property in goods in a works contract is taxable even if the dominant intention of the contract is to provide services. Therefore, the court held that the turnover of property involved in the execution of the works contract was rightly subjected to tax under Section 5F of the APGST Act, 1957. Conclusion: The court dismissed all the writ petitions, affirming that the contract dated 29.06.2002 was a works contract and the turnover of property involved in its execution was liable to be taxed under Section 5F of the APGST Act. The court emphasized that the legal fiction introduced by Article 366(29-A)(b) of the Constitution allowed for the separation of the transfer of property in goods from the contract of service, making the contract taxable as a works contract.
|
