2014 (2) TMI 1362 - HC - VAT and Sales Tax

Rate of tax - Iron and Steel used by the Respondent for the execution of works contract being transferred not as goods but in some other form - HELD THAT - The issue decided in favour of the respondent-assessee and against the petitioner-State. Deduction towards land value from the total turnover to arrive at taxable turnover - Joint Development Agreement with the land owner to construct the building for him - HELD THAT - The deduction is allowed - decided in favour of the respondent- assessee and against the Revenue.

Summary

Issues:
1. Taxation of Iron and Steel used in works contract
2. Deduction of land value in Joint Development Agreement

Analysis:
1. The first issue revolves around the taxation of Iron and Steel used in works contracts. The respondent argued that the material was transferred not as goods but in another form, hence should be taxed at 4% instead of 12.5%. The court referred to a previous judgment and concluded that the issue was identical to a case decided earlier. Both parties agreed that the first question should be answered in favor of the respondent-assessee, and the court ruled accordingly.

2. The second issue concerns the deduction of land value in a Joint Development Agreement. The court relied on a Supreme Court judgment and found that the issue was squarely covered by it. The petitioner's counsel acknowledged that the second question was covered by the Supreme Court judgment. The court ruled in favor of the respondent-assessee and against the Revenue on this issue. The respondent-developer confirmed that VAT/Sales Tax was paid on the entire material cost used for construction, which was accepted and recorded by the court.

In conclusion, the High Court of Karnataka disposed of the sales tax revision petitions, ruling in favor of the respondent-assessee on both issues. The court's decision was based on the applicability of previous judgments and the agreement between the parties on the resolution of the questions raised. The court also addressed the payment of VAT/Sales Tax by the respondent-developer and left room for verification of the statement by the petitioner if deemed necessary.