Content Provider | Supreme Court of India |
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e-ISSN | 30484839 |
Language | English |
Access Restriction | NDLI |
Subject Keyword | Karnataka Sales Tax Act 1957-Sections 5B and 2(J)(v-i) |
Content Type | Text |
Resource Type | Law Judgement |
Jurisdiction | India |
Case Type | Appeal |
Court | Supreme Court of India |
Disposal Nature | Appeal Dismissed |
Headnote | Karnataka Sales Tax Act, 1957-Sections 5B and 2(1)(v-i)-Works Contract Tax-Levy of-Agreement whereby developers undertaking to build flats for prospective purchaser for valuable consideration-On completion, unit to be handed over to the purchaser who would get undivided interest-Developer 's plea that tax not payable as no transfer of any property in goods by itself or by virtue of any works contract-On appeal, held: Agreement to construct a building either for cash or deferred payment or valuable consideration is 'works contract', the construction activity may be on behalf of an owner of the property or by the owner-Developers have possessary interest and a right to construct and as such are not owners of property but claim a lien on the property-Hence, developer liable to pay turnover tax on transfer of property in goods pursuant to 'works contract' provided the agreement is entered into before the construction is complete and not after completion-Furthermore, by reason of termination clause, agreement does not cease to be a 'work contract'. Appellant-Development Corporation are engaged in business of real estate development and allied contracts. They entered into a sale agreement with the intended purchasers for construction of building and flats for valuable consideration to be paid in the manner stated in the agreement. Pursuant to this, plans were to be sanctioned. The purchasers were to get undivided interest in the land. The owner of the land were to transfer the ownership directly to the society formed under the Karnataka Ownership Flats (Regulation of Promotion of Construction, Sales, Management and Transfer) Act, 1974. With regard to the liability to pay turnover tax, appellants filed returns showing nil tax liability. The Authorities held that tax was payable as there was transfer of property in goods pursuant to a work contract. Aggrieved appellants filed an appeal. Tribunal held that the turnover could only be computed on value of goods in execution of the works contract. Thereafter, the appellants filed Revision Petition before the High Court which was dismissed. Hence the present appeal. Appellant contended that by virtue of the Agreement entered into by the appellants with the owner of the property, appellants became owners of the property and that the entire consideration amount is paid to the owners and possession of the property is handed over to the appellants; that the appellants did not undertake any works contract for and on behalf of the intended purchasers; that developing the property and selling flats or commercial complexes by the appellants does not involve works contract; and that the agreement clause that if all payments are not made then amount paid can be forfeited and the agreement rescinded indicates that the agreements are not agreements to carry out a works contract. |
Judge | Hon'ble Mr. Justice S.N. Variava |
Neutral Citation | 2005 INSC 262 |
Petitioner | M/s. K. Raheja Development Corporation |
Respondent | State Of Karnataka |
SCR | [2005] 3 S.C.R. 1210 |
Judgement Date | 2005-05-05 |
Case Number | 2766 |
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