TMI Blog1999 (9) TMI 937X X X X Extracts X X X X X X X X Extracts X X X X ..... Act when none of the features of a sale or deemed sale in works contract is established? (iv) Whether, on the facts and circumstances of the case, it is permis sible in law to take the sale price of immovable properties sold by the appellant as the consideration for tax under section 5-B of the Act? 2.. The assessee is a registered dealer under the Karnataka Sales Tax Act, 1957 and according to him he is engaged in the business of developing properties; acquiring the land with rights of the owner by paying full consideration, and thereafter developed the property on the said land and later sold the same as immovable property; the assessee/appellant claimed exemption from paying tax under section 5-B of the Act; the assessment for the years 1987-88, 1988-89, 1989-90 and 1990-91 were concluded by extending the benefit of composition under section 17(6) of the Act by the order dated November 18, 1993 and March 1, 1994 and April 12, 1994. In appeal to Additional Joint Commissioner of Commercial Taxes which is the first appellate authority, the first appellate authority held that the appellant is not exigible to tax under the Act. The revisional authority initiated the proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ck building of flats, shops, offices, godowns, garages, etc., were proposed to be constructed by them and they did not effect composite sale of land with structured buildings thereon. Unlike English Law, Indian Law does not recognise legal and equitable estates as such, therefore there can be only one "owner". Where sale deed requires registration under section 54 of the Indian Transfer of Property Act, 1882, title does not pass until the sale deed has been registered though there may be transfer of possession and payment of consideration. In the absence of a registered sale deed nobody can be the owner of an immovable property on the basis of agreement to sell and the power of attorney executed by the vendor in his favour,-(Imtiaz Ali v. Nasim Ahmed AIR 1987 Delhi 36). The equitable doctrine of part performance incorporated in section 53-A of the Transfer of Property Act, 1882 can be used only as defence in action for ejectment, etc., it cannot be used as a weapon of attack. Section 53-A can be used only as a shield and not as a sword-(Juharmal v. Kapoor Chand AIR 1983 Raj 139; Kashi Nath Tewari v. Makchhed Tewari AIR 1939 All. 504), the concept of de facto ownership or deemed own ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent between the dealer MIC and M/s. Venkateswara Enterprises, of which the landlady Smt. Thirulakshmi was a partner, and the cross connections between these two sets of agreements, and the relevant provisions of the Specific Relief Act, 1963 and the Transfer of Property Act, 1882, it is clear that each of the several persons who had entered into agreement with the dealer MIC to take the flats, shops, offices, godowns, garages, etc., on ownership basis, had by virtue of that agreement acquired a right or interest in the plots of land on which flats, shops, offices, godowns, garages, etc., were proposed to be built to the extent of the undivided portion of the land relatable to flats, shops, offices, godowns, garages, etc., agreed to be taken by them. 8.. Once the existence of works contracts is established, the contention that what was flats as immovable property cannot be accepted. Because after 46th Amendment to the Constitution, what was an indivisible contracts has been altered by a legal fiction into a divisible contract, one for the sale of goods and the other for supply of labour and services. 9.. It is not in dispute that though the full consideration is said to have bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll the world that is with everybody, and that you cannot contract with everybody. It is not a contract made with all the world. There is a fallacy of the arguments. It is an offer made to all the world and why should not an offer be made to all the world which is to ripen into a contract with anybody who comes forward and performs the conditions? ....... Although the offers made to the world, the contract is made with that limited portion of the public who come forward and perform the condition on the faith of the advertisement." 11.. Taking into consideration the definition of the plot under section 2(a) of the Ownership Flats Act, 1972 and the promoters under section 2(c) of the said Act and the liabilities fixed on the promoters under section 3 of the Act on the promoter and the effect of section 7 of the Ownership Flats Act goes to show that when a promoters proposes to construct a bulk block building of flats, enters into an agreement that a person who agreed to take plots, the promoters does not make a contract to sell the completed flats until by that time or after becoming owner of the flats. But what he contract is to construct the flats according to the plan and speci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th approval the following passages from Hudson's Building Contracts at pages-362: "The well-known rule is that the property in all materials and fittings, once incorporated in or affixed to a building, will pass to the freeholderquicquid plantatur solo, solo cedit. The employer under a building contract may not necessarily be the freeholder, but may be a lessee or licensee, or even have no interest in the land at all, as in the case of a sub-contract. But once the builder has affixed materials, the property in them passes from him, and at least as against him they become the absolute property of his employer, whatever the latter's tenure of or title to the land. The builder has no right to detach them from the soil or building, even though the building owner may himself be entitled to sever them as against some other person-e.g., as tenant's fixtures. Nor can the builder reclaim them if they have been subsequently severed from the soil by the building owner or anyone else. The principle was shortly and clearly stated by Blackburn, J., in Appleby v. Myers [1867] LR 2 CP 651 at p. 659: 'Materials worked by one into the property of another become part of that property. This is e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should have absolute ownership over the land, but it is enough that he has some limited interest in the land. It is also seen that the person who are entered into an agreement with the dealer to take the flats before construction or by virtue of that agreement acquire any right or interest over the flats or land on which the flats were to be built to the extent of an undivided proportion of the land relating to the flats agreed to be taken by them. 18.. After the 46th Amendment to the Constitution and insertion of clause (29-A) to article 366 by a legal fiction altered the definition of "sale" which is divisible into one for sale of goods and the other for supply of labour and services. Tax on the transfer of property in goods (whether as goods or in some other form) involved in the execution of those contracts is deemed to be a sale of those goods by the person making the transfer and a purchase of those goods by the person to whom such transfer is made. 19.. In Builders Association of India v. Union of India [1989] 73 STC 370, the apex Court held that: '...........It is difficult to agree with the contention of the States that the properties that are transferred to the ow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e property of the value of more than one hundred rupees without registration cannot extinguish the equity of redemption. In India it is only on execution of the conveyance and registration of transfer of the mortgagor's interest by registered instrument that the mortgagor's right of redemption will be extinguished." 21.. If the building was first constructed and thereafter agreed to be sold then it was a case of transfer of immovable property. According to the agreement entered into by the appellant with the allottee of flat or other building, advance is taken at the time of execution of contract and thereafter in 15 instalments the balance amount is to be paid at the time of giving possession of flat, etc. It has not been established that at the time when the agreement was entered into even construction of building started by the appellant. The ultimate purchaser has to purchase the land of his share from the owner and not from the appellant. It had also come on record that after entering into the agreement by the appellant with the owner only plans were got approved and immediately thereafter agreements were entered into with the prospective buyer. The construction was done und ..... X X X X Extracts X X X X X X X X Extracts X X X X
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