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2021 (3) TMI 538 - HC - VAT and Sales TaxLevy of tax on sale of apartments - works contract or not - whether petitioner is liable for pending under Section 72(2) of the Karnataka Value Added Tax Act, 2003? - HELD THAT - In the case of COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS 2015 (8) TMI 749 - SUPREME COURT it has been held that the activity of construction undertaken by the developer would be worst contract only from the stage the developer enters into a contract with purchaser of the flat and the value addition made to the goods transferred after the agreement is entered into with purchaser of the flat can only be made chargeable to tax by the State Government. Thus the decision of the Supreme Court by which parameters have been fixed with regard to levy of value Added Tax on Works contract was laid down after the tribunal had passed the order on 24.06.2011. The tribunal therefore has taken into account the law as prevailing prior to the decision of the three judge bench of the Supreme Court in L T supra. The machinery provisions exist in the Act and the Rules viz., Section 3(1) 4(1) and Rules 3 (2) (l) (m) of the Rules. The effect of the aforesaid machinery provisions has to be considered in the light of the decision of the larger bench of the Supreme Court in L T supra and the liability of the petitioner has to be assed to pay the Value Added Tax afresh. Petition disposed off.
Issues:
Levy of tax on sale of apartments under Karnataka Value Added Tax Act, 2003 - Determination of works contract liability and pending under Section 72(2) of the Act. Analysis: 1. The petitioner challenged an order passed by the Karnataka Appellate Tribunal regarding the levy of tax on the sale of apartments between April 2005 to March 2006. The substantial questions of law included determining whether the petitioner's works contract was liable to tax under the Act and if the petitioner was liable for pending under Section 72(2) of the same Act. 2. The petitioner, a real estate development company, entered into agreements for the sale of apartments at different stages of construction. The Assessing Authority treated the entire sale consideration of apartments as turnover, applying higher tax rates for certain transactions, leading to the levy of further tax, interest, and penalty. The Joint Commissioner and the tribunal upheld parts of the order, resulting in the petitioner filing a petition challenging the decision. 3. The petitioner argued that the Act lacked provisions to exclude the value of land and determine the taxable value of goods incorporated into works contracts after agreements with purchasers, as highlighted in a Supreme Court decision. The absence of machinery provisions for such computation rendered the levy of tax invalid. The petitioner also contended that penalty under Section 72(2) was not automatic, especially when the taxability issue was previously addressed by the Supreme Court. 4. The Additional Government Advocate cited relevant sections and rules, asserting that machinery provisions existed in the Act and Rules. Referring to previous court decisions, it was argued that no substantial question of law arose for consideration in the petition. 5. The Court examined the legal provisions and noted the Supreme Court's decision on taxing the sale of goods element in works contracts. The Court emphasized that the machinery provisions under the Act and Rules needed to be interpreted in light of the Supreme Court's ruling. Consequently, the tribunal's order was quashed, and the petitioner's liability for Value Added Tax was to be reassessed based on the Supreme Court's directions. 6. The Court concluded by disposing of the petition, stating that it was unnecessary to address the substantial questions of law initially raised. The decision highlighted the importance of aligning the assessment of tax liabilities with the legal principles established by higher courts, ensuring a fair and accurate determination of tax obligations under the Karnataka Value Added Tax Act, 2003.
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