2015 (3) TMI 521 - HC - VAT and Sales Tax

Liability of tax - Whether the nature of transaction/joint development agreement between the land owner and the developer, in the present case, would oblige either of them to pay tax on the transfer of goods involved in the execution of works contract in respect of developer's 3 share and/or land owner's share and if yes, who has to pay the tax - Held that - these questions undoubtedly arise for consideration in these matters, were admittedly not raised/considered before/by the Tribunal. In view thereof, learned counsel for the parties, have agreed for remand of these matters to the Karnataka Appellate Tribunal with direction to consider these questions - Following decision of Larsen & Toubro Limited and another Vs. State of Karnataka and another 2013 (9) TMI 853 - SUPREME COURT - Decided against Revenue.

Summary

Issues:
1. Interpretation of sales tax laws in building work contracts.
2. Obligation to pay tax on transfer of goods in joint development agreements.
3. Determining liability for tax payment on material/goods in works contracts.
4. Consideration of whether joint development agreements constitute a sale under KVAT Act 2003.

Analysis:
The High Court of Karnataka heard a group of sales tax revision petitions stemming from an order by the Karnataka Appellate Tribunal. The Tribunal had framed a question regarding the inclusion of land price in the total receipt for tax purposes under a conciliation scheme in building work contracts. The High Court formulated substantial questions of law for consideration, including the obligation to pay tax on the transfer of goods in joint development agreements and determining the liability for tax payment on materials in works contracts. Despite these questions not being raised before the Tribunal, both parties agreed to remand the matters back to the Tribunal for consideration. The High Court directed the Tribunal to decide the questions expeditiously, allowing both parties to present relevant materials and judgments for their contentions.

The principle question raised in the revision petitions concerning land value was found to be covered by a judgment of the Supreme Court in Larsen & Toubro Limited vs. State of Karnataka, which favored the respondent-assessee. As a result, the High Court disposed of the sales tax revision petitions, emphasizing that no costs were to be incurred. The judgment highlighted the importance of the Tribunal considering the substantial questions of law and related issues, with the expectation that all relevant materials presented by the parties would be taken into account during the proceedings.