2018 (12) TMI 768 - HC - VAT and Sales Tax

Imposition of tax liability - works contract - addition of 20% made in the turnover - benefit of section 3-F(2)(B)(i) of the U.P. Trade Tax Act, 1948 - Held that - Issue as to whether necessary ingredients to attract levy of tax by applying principles of works contract appear to have been extensively dealt with by the assessing authority and also by the tribunal - The assessing authority has relied upon the standard format used for issuing allotment to the buyers. Specific clause of the agreement has been examined to return a finding that construction work undertaken by the revisionist on behalf of the allottees, would amount to a works contract . The question as to whether import of goods/construction materials from beyond the State of Uttar Pradesh was in furtherance of specific contract and was meant exclusively for it has been specifically urged, but the same does not appear to have been adverted to by the tribunal. - Matter remanded back. Revision disposed off.

Issues:
1. Challenge to the order of Commercial Tax Tribunal regarding tax liability for the Financial Year 2005-06.
2. Interpretation of 'works contract' in relation to construction activities.
3. Denial of benefit under U.P. Trade Tax Act.
4. Justification of adding 20% amount towards construction materials.
5. Examination of factual aspects regarding purchases from outside the State for construction work.

Issue 1:
The revisionist, a real estate company, challenged the Commercial Tax Tribunal's order imposing a tax liability of ?63,61,207.00 for the Financial Year 2005-06. The tribunal relied on the K. Raheja Development Corporation case to assert that the construction work undertaken by the revisionist falls under the definition of a 'works contract.' The tribunal also applied section 44-B of the U.P. Trade Tax Act, 1948, allowing a 20% addition where the value of goods utilized was not ascertained. The revisionist contested the proceedings on legal and factual grounds, but the tribunal upheld the tax liability determination.

Issue 2:
The tribunal concluded that the construction work undertaken by the revisionist constitutes a 'works contract' as defined under section 2(m) of the U.P. Trade Tax Act, 1948. This decision was based on the principles established in the K. Raheja Development Corporation case. The assessing authority and the tribunal extensively analyzed the necessary ingredients to apply the 'works contract' principles, finding the revisionist's construction activities to fall within this definition.

Issue 3:
The revisionist challenged the denial of benefit under section 3-F(2)(B)(i) of the U.P. Trade Tax Act, 1948. However, the tribunal's decision on this issue was not detailed and appeared somewhat cryptic. The revisionist's argument regarding the acceptance of books of account and the omission of considering details related to purchased goods/materials was not adequately addressed by the tribunal. The matter was recommended to be remitted back to the tribunal for further examination.

Issue 4:
Regarding the addition of 20% towards construction materials, the tribunal justified this based on section 44-B of the U.P. Trade Tax Act, 1948. The tribunal allowed the increase as the sales price was not determined, thus permitting the addition over the purchase price. This decision was upheld without interference in the revisional jurisdiction.

Issue 5:
The tribunal's discussion on the factual aspects of purchases from outside the State for construction work was found to be lacking clarity and thoroughness. The revisionist's argument about the exclusivity of goods/materials purchased for specific contracts was not adequately addressed. The tribunal's treatment of the third issue raised was also deemed insufficient. Given the tribunal's role as the highest fact-finding authority, the matter was recommended to be remitted back for further examination of these aspects.

In conclusion, the High Court's judgment affirmed the tribunal's finding on the first issue regarding the 'works contract' interpretation but recommended remitting the matter back to the tribunal for a more detailed examination of the factual aspects related to purchases from outside the State and the denial of benefits under the U.P. Trade Tax Act. The decision on the addition of 20% towards construction materials was upheld, and the revisionist's concerns were directed to be addressed by the tribunal for a comprehensive review.

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