VAT on Builders and Developers (Issues involve Levi of Commercial Tax-VAT on Material purchase for own projects and issued free of cost to the Contractors for Executions of Construction.) The controversy regarding liability to pay VAT on agreements for sale flats and units by builders and developers has been looming around for over six years. The debatable issue arises only in those cases where builder enters into an agreement for sale of flat with prospective buyer when the construction is yet to commence or is under progress. Such agreements are normally referred to as “Under Construction Contracts/Agreements”. Till the judgment of Hon’ble Supreme Court in case of K. Raheja Development Corporation vs. State of Karnataka 141 STC 298 (SC), such contracts were considered to be for sale of immovable property and the Sales Tax Department did not contemplate any levy on the same. However, after the above judgment a debatable position arose. K. Raheja Development case (2005) 141 STC 298 of the Apex Court which arose out of the order of Hon’ble Karnataka High Court question was as to “whether the Contractor has constructed the building for himself or it was constructed for the prospective buyers with whom the agreements have been entered into even before the construction”. Division Bench of the Supreme Court consisting of Hon’ble Mr. Justice S.H. Kapadia and Hon’ble Mr. Justice B. Sundershan Reddy passed an order on 19th August, 2008 in the case of M/s. Larsen & Tourbo Ltd. Vs. State of Karnataka, reported in (2008) 17 VST 460, doubting the correctness of the judgment of M/s. K. Raheja Constructions and referred to a Larger Bench for its reconsideration. The principles of law laid down by the Division Bench of this Hon’ble Court in the case of Assotech Realities Pvt. Ltd. reported in 2007 UPTC, page 797, has not been set aside but only in the SLP filed by the State before the Supreme Court the Hon’ble Supreme Court has directed the Assotech Realities Pvt. Ltd. to file an appeal and the order of the High Court was set aside only on the ground of alternative remedy. Appeal filed by Assotech Realities Pvt. Ltd., the Commercial Tax Tribunal, Ghaziabad by its order dated 11th June, 2010 has allowed the appeal and has set aside the order passed by the assessing authority imposing the tax under section 3-F of the Act. The order of the Tribunal has been confirmed by this Hon’ble Court when the revision filed by the department was dismissed by the High Court and the judgment of the Tribunal was confirmed in the case of Assotech Realities Pvt. Ltd., reported in 2012 (Vol.15) VSTI, page 923. In view of the decision of the two Members Bench of the Commercial Tax Tribunal, Ghaziabad, dated 11th June, 2010, which has been confirmed by the Hon’ble Allahabad High Court in the case of CST Vs. Assotech Realities Pvt. Ltd., reported in 2012 (Vol.15) VSTI, page 923, the Commercial Tax , Lucknow could not have taken a different view and the Tribunal was not justified in confirming the imposition of tax upon the applicant. QUESTIONS OF LAW, Whether the correctness of the judgment of K. Raheja Development Corporation , reported in 2005 (141) STC, page 298, having itself been doubted by the Hon’ble Supreme Court of India in the case of Larsen & Toubro Ltd. Vss. State of Karnataka, reported in 2008 (Vol.17) VST, page 460. In the Case of M/S Unitech Ltd. Vs Commissioner Commercial Tax UP, the Commercial Tax Revision for the assessment year 2006-07 which was filed in the High Court, came up for arguments on Feb’2013 before Hon’ble Justice Shabihul Hasan. After hearing the arguments of the Parties at some length,the revision was admitted and the stay order was also passed , staying the operation of the order of the Commercial Tax Tribunal Lucknow dt,19th October ,2012 in Second Appeal no.508 of 2009 for Assessment Year 2006-07.The state has been allowed three weeks time to filed the objections. The revision has been directed to be listed thereafter at High Court Allahabad ,Bench Lucknow. In view of the above conclusion, we do not propose to declare any of the impugned provisions unconstitutional but we declare that those provisions must be understood as explained in this judgment.
Posted on: Sat, 10 Aug 2013 15:38:13 +0000
Trending Topics
Recently Viewed Topics
© 2015