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2017 (5) TMI 734 - HC - VAT and Sales TaxSale / Deemed sale - receipt of Transferable Development Rights (TDR) - whether handing over and construction of tenements to SRA amounts to sale within the meaning of MVAT or not? - whether the issue and receipt of the TDR amounts to other valuable consideration? - Held that - in the instant case, what is brought within the purview of the Act is a sale as defined in section 2 clause (24). It means a sale of goods made within the State. Such sale must by for cash or deferred payment or other valuable consideration, but does not include what is spelt out in the first part and preceding the explanation of clause (24). Then, the Explanation follows and it is for the purpose of section 2 clause (24) itself. This explains that not only a sale within the State, including a sale determined to be inside the State in accordance with the principles formulated in section 4 of the Central Sales Tax Act, 1956 - For our purpose we have to see whether transfer of property in goods or in some other form involved in the execution of a works contract and which includes an agreement for carrying out for cash, deferred payment or other valuable consideration the works set out in subclause (ii) of clause (b) and all the other sub-clauses, namely, delivery of goods on hire purchase, the transfer of right to use any goods for any purpose, the supply of goods by any association of a body of persons etc and supply by way of or part of any service. Each of these are deemed to be a sale. Therefore, a transfer of property in goods whether as goods or in some other form involved in the execution of a works contract, including the works specified in an agreement for carrying out for cash, deferred payment or other valuable consideration and enumerated in sub-clauses of clause (b) are deemed to be a sale. The developer will be entitled to transfer or assign the TDR and/or DRC which may become available to him under this agreement as the developer may desire, without reference or recourse to or consent and concurrence of the SRA. If the very concept is understood as generating a right in favour of the developer-appellant which can be transferred for money in the open market, then, it is evident that both this agreement and also the Deed of Conveyance separately executed enable the petitioner-developer to earn consideration in the form of money. If this is a transferable property and commanding a price in the market, then, on the own showing of the petitioner-appellant, there is a money component clearly involved. The other valuable consideration for which the works are to be carried out under the works contract and which involves transfer of property in goods, therefore, is nothing but money - this is a clear transaction where the petitioner-developer has for other valuable consideration which is nothing but money, agreed to construct the number of tenements specified above and handing them over free of cost to the SRA. In return of the same, it has obtained the above monetary benefits. To say that what they have obtained is an immovable property in exchange or in lieu of the cost of construction incurred by them means not presenting a true and complete picture. The DRC by itself has been sold for a price in the market depending upon demand and supply conditions. Thus, we have no hesitation in holding that this is to be understood as a valuable consideration and equivalent to money. Petition fails and is dismissed - decided against petitioner-assessee.
Issues Involved:
1. Maintainability of the Writ Petition. 2. Whether the transaction of handing over land and constructed tenements to SRA amounts to "sale" under MVAT Act, 2002. 3. Whether the receipt of Transferable Development Rights (TDR) is considered as "other valuable consideration" under MVAT Act, 2002. 4. Computation of tax liability based on market value using Ready Reckoner. 5. Interest under Section 30(1) of MVAT Act, 2002. Detailed Analysis: 1. Maintainability of the Writ Petition: The writ petition challenges the order dated 3rd May, 2016, from the Maharashtra Sales Tax Tribunal. The preliminary objection raised by the State was regarding the maintainability of the writ petition due to the availability of an alternate remedy. However, the court noted that the petitioner had indeed exercised the statutory right of appeal under Section 27 of the MVAT Act, 2002, making the writ petition maintainable. Therefore, the preliminary objection was rejected. 2. Whether the Transaction Amounts to "Sale" under MVAT Act, 2002: The core issue was whether the transaction of handing over land and constructed tenements to SRA amounts to "sale" by way of works contract under MVAT Act, 2002. The Tribunal had concluded that the activity of constructing tenements free of cost and handing them over to SRA was taxable as a works contract under Section 2(24) of the MVAT Act. The court agreed with this view, stating that the transaction involved a transfer of property in goods, which is deemed to be a sale under the MVAT Act. 3. Receipt of Transferable Development Rights (TDR) as "Other Valuable Consideration": The Tribunal and the court considered whether the receipt of TDR in lieu of constructed tenements amounts to "other valuable consideration." The petitioner argued that TDR should not be considered as monetary consideration. However, the court held that TDR, which can be sold in the open market for a price, constitutes "valuable consideration" and is equivalent to money. This interpretation aligns with the definition of "sale" under the MVAT Act, which includes transactions for cash, deferred payment, or other valuable consideration. 4. Computation of Tax Liability Based on Market Value: The Tribunal directed the computation of tax liability based on the market value using the Ready Reckoner under the Stamp Duty Act. The court found no fault with this approach, stating that the Tribunal's method of determining the value of the goods involved in the works contract was appropriate. The court emphasized that the intrinsic worth of the TDR, which has a market value, could be used to compute the tax liability. 5. Interest under Section 30(1) of MVAT Act, 2002: The Tribunal had confirmed the interest under Section 30(1) of the MVAT Act, 2002. The petitioner argued for a waiver or reduction of interest. However, the court upheld the Tribunal's decision, stating that the interest was justified given the circumstances of the case. Conclusion: The court dismissed both the writ petition and the appeal, upholding the Tribunal's order. The substantial questions of law were answered in favor of the Revenue. The court concluded that the transaction involving the receipt of TDR in exchange for constructed tenements amounts to a "sale" under the MVAT Act and that TDR constitutes "valuable consideration." The method of computing tax liability based on market value using the Ready Reckoner was also upheld. The request for a stay of recovery by coercive means was refused.
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