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2018 (3) TMI 197 - HC - Indian LawsVAT charges relating to the period of construction - collaboration agreement - whether this is the liability of owner or liability of builder? - interpretation of statute. Held that - Clause 11 of the collaboration agreement is categorical that the entire amount required or payable for carrying out construction, development, completion was wholly on account of the builder. This Clause can have only one interpretation. The amount required or payable for carrying out the construction includes the VAT. The VAT amount would be covered clearly under the terminology statutory and other fees as contained in Clause 11. Thus, the demand for VAT charges from the owner cannot be on the basis of the collaboration agreement. The builder undertook the construction for his own benefit and not the owner s benefit. The acquiring of ownership rights by undertaking construction shows that the collaboration agreement was not a contract for rendering services to the owner. There was no sale of goods or services between the owner and the builder. Admittedly, the VAT charges which have been claimed relate to the period of construction and not thereafter. The transaction for which the VAT is being demanded from the owner is, as per the invoice, for the period January, 2013 which is during the period of construction. This was clearly not the responsibility of the owner. The owner has not bought any goods or services from the builder for her benefit, but the construction items and other goods have been purchased by the builder for completing the construction which was his own responsibility. This is not a case of a works contract under Section 2(zo) of the Delhi Value Added Tax Act, 2004. Thus, on a clear reading of the collaboration agreement, the suit under Order XXXVII of the CPC is itself not maintainable. The suit is held to be not maintainable and the same is dismissed - appeal allowed - decided in favor of appellant.
Issues:
1. Liability of the owner for VAT charges under a collaboration agreement. 2. Interpretation of clauses in the collaboration agreement regarding payment responsibilities. 3. Validity of the suit filed under Order XXXVII of the CPC. 4. Consideration of Delhi Value Added Tax Rules, 2005 in determining liability. 5. Analysis of the builder's conduct in raising VAT charges against the owner. Analysis: 1. The collaboration agreement clearly outlined the responsibilities of the builder, including the entire construction costs and fees, as per clause 11. The builder's role was that of an owner acquiring rights in the property, not a service provider for the owner. The builder was solely responsible for all costs, including VAT charges, as per the agreement. 2. The clauses in the collaboration agreement, especially clause 11, emphasized that the builder bore all expenses for construction. The owner's liability for taxes and dues only arose after completion and handover of the building, not during the construction phase. The agreement did not intend for the owner to bear VAT charges related to construction. 3. The suit filed under Order XXXVII of the CPC was found to be not maintainable as the collaboration agreement clearly defined the payment responsibilities, and the VAT charges demanded from the owner were not justified. The court set aside the decree and order based on the lack of liability on the owner. 4. The owner's reliance on the Delhi Value Added Tax Rules, 2005 was considered, and it was concluded that the charges towards labor services and other expenses were excluded from taxable turnover as per Rule 3. Therefore, no liability could be imposed on the owner for VAT charges. 5. The builder's conduct in raising VAT charges after completing the transaction for the First Floor was deemed questionable. The invoice for VAT charges was seen as an afterthought, and the attempt to pass on the responsibility to the owner was not in good faith. The court dismissed the suit, emphasizing that the owner was not liable for the VAT charges as per the collaboration agreement. This detailed analysis of the judgment highlights the key issues, interpretations of clauses, legal considerations, and the court's findings regarding the owner's liability for VAT charges under the collaboration agreement.
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