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TMI Blog2017 (5) TMI 1122X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 3 F of the U.P. Trade Tax Act, on the goods purchased from outside the State of U.P., specifically for the purpose of being used in the construction of building for which risk and reward passed on the purchaser on execution of sale deed? - Held that: - There does not seem to be much clarity on facts in the order of the Tribunal on such aspects. Whether, the addition of 20% profits made in the purchase value of goods purchased for being used in the construction activity is based on surmises and conjectures and, therefore, not sustainable in the eyes of law? - Held that: - Learned Standing Counsel seems to be right in contending that proper factual premise do not appear to have been laid by the assessee in that regard. Matter on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Counsel, on the other hand, submits that it is admitted to the revisionist that not only allotment of flat was made, but the funds received as allotment money was utilised for raising construction. It is contended that in view of the law laid down by the Apex Court in K. Raheja Development Corporation Vs. State of Karnataka, (2005) 5 SCC 162, as well as in M/s Larsen Toubro Limited and another Vs. State of Karnatak and another, reported in 2013 U.P.T.C.,1277, necessary ingredients to make out a case of works contract is clearly established. Para-107 of the judgment in M/s Larsen Toubro notices the ratio laid down in K. Raheja (supra). Paras-101 and 107 of the judgment are reproduced:- 101. In light of the above discussion, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k and labour and a contract for sale. In such composite contract, the distinction between contract for sale of goods and contract for work (or service) is virtually diminished. (vi) The dominant nature test has no application and the traditional decisions which have held that the substance of the contract must be seen have lost their significance where transactions are of the nature contemplated in Article 366(29-A). Even if the dominant intention of the contract is not to transfer the property in goods and rather it is rendering of service or the ultimate transaction is transfer of immovable property, then also it is open to the States to levy sales tax on the materials used in such contract if such contract otherwise has elements of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e absent within the ambit of sale or purchase for the purposes of levy of sales tax. In other words, transfer of movable property in a works contract is deemed to be sale even though it may not be sale within the meaning of the Sale of Goods Act. (xi) Taxing the sale of goods element in a works contract under Article 366(29-A)(b) read with Entry 54 List II is permissible even after incorporation of goods provided tax is directed to the value of goods and does not purport to tax the transfer of immovable property. The value of the goods which can constitute the measure for the levy of the tax has to be the value of the goods at the time of incorporation of the goods in works even though property passes as between the developer and the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viii. If the agreement is entered into after the flat or unit is already constructed then there would be no works contract. But, so long as the agreement is entered into before the construction is complete it would be works contract . Since it is found that an agreement was duly arrived at between the parties for carrying out construction activities and pursuant to such contract the developer had also received money, the existence of works contract is clearly established. The first question posed for consideration, therefore, is answered by holding that the Tribunal as well as the authorities were justified in treating the construction work undertaken to be works contract. So for as the 2nd question is concerned, the issue that a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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