Subscription   Feedback   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Articles Highlights TMI Notes SMS News Newsletters Calendar Imp. Links Database Experts Contact us More....
Extracts
Home List
← Previous Next →

M/s Sew Infrastructures Ltd. Versus The State of Karnataka And Others

2016 (4) TMI 610 - KARNATAKA HIGH COURT

Constitutionality of Rule 3(2)(i-1) of KVAT Rules - Taxability in the hands of whom - Whether consideration paid by the main contractor to the sub-contractors formed part of the subcontractors turnover liable to tax in the hands of subcontractors and does not form part of the contractors turnover - Engaged in execution of infrastructure projects involving work contracts which are got executed through sub-contractors - Appellant contended that Joint Commissioner of Commercial Taxes has not referr .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

-contractor has indeed included the amount received by him from the petitioner in his returns filed and that the same has been reflected in the assessment orders later on passed, copy of which has been also produced, without going into the constitutional validity of Rule 3(2)(i-1) of KVAT Rules, the matter is remanded to the Joint Commissioner of Commercial Taxes for fresh consideration in accordance with law keeping in mind the principle of law enunciated in the case of LARSEN & TOURBO LIMITED .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

petitioner - Company is challenging the order dated 12.06.2015 passed by the Joint Commissioner of Commercial Taxes (Admin.) DVO., Davangere Division - respondent No.3 herein. By the said order, exercising his powers under Section 63-A, 72(2) and 36 of the Karnataka Value Added Tax Act, 2003 (for short, 'the KVAT Act'), he has set aside the reassessment order dated 28.06.2014 passed by the Deputy Commissioner of Commercial Taxes (Audit & Recovery), Ballari for the tax periods from Ap .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ideration paid by the main contractor to the sub-contractors formed part of the subcontractors turnover liable to tax in the hands of subWP. contractors and does not form part of the contractors turnover and therefore, levy of tax contrary to the above principle was beyond the powers conferred under Section 3(1) of the KVAT Act. 2. Petitioner is a company incorporated under the provisions of the Companies Act, 1956. It is a dealer registered under the KVAT Act. Petitioner is engaged in execution .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

& Engineering (India) Private Limited. It was alleged that as proof regarding payment of tax by the said sub-contractors had not been filed, deduction claimed had to be disallowed. Petitioner furnished copies of the sub-contract agreements and copy of reassessment order passed in the case of M/s.Venkata Sai Constructions Private Limited by the Assistant Commissioner of Commercial Taxes (Audit)-2, Mysuru, for the tax periods April, 2011 to March, 2012 and the returns filed by the other sub-c .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

and ₹ 1,71,68,764 in the case of M/s.R.K.Infra & Engineering (India) Private Limited. 4. When the Joint Commissioner of Commercial Taxes took up the matter for revision and issued notice proposing to review the reassessment order passed by the Deputy Commissioner of Commercial Taxes, Ballari, stating that deductions allowed towards sub-contractors had not been assessed to tax nor they had filed returns declaring turnovers to the extent of payments made by the petitioner in favour of su .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

t Commissioner of Commercial Taxes, learned counsel for the petitioner has essentially contended that the Joint Commissioner of Commercial taxes has ignored the ratio laid down by the Apex Court in the case of STATE OF ANDHRA PRADESH & OTHERS Vs. LARSEN & TOURBO LIMITED AND OTHERS - (2008) 17 VAT AND SERVICE TAX CASES 1 (SC) and has proceeded solely on the basis of the proviso to Rule 3(2)(i-1) of KVAT Rules. He has taken me through the decision of the Apex Court and the relevant provisi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

inst the order passed by the Joint Commissioner of Commercial Taxes and therefore, writ petition is not maintainable. He has urged that petitioner ought to have produced relevant documents showing that sub-contractors had included the amount received by them from the contractor while submitting their returns. He has urged that challenge to Rule 3(2)(i-1) of KVAT Rules is misconceived inasmuch as the said rule has been incorporated to achieve the object of ascertaining what has been exempted from .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

eration paid by the main contractor to the sub-contractors forms part of subcontractors turnover liable to tax in the hands of subcontractors and does not form part of main contractors turnover has been laid down in the judgment of the Apex Court in the case of STATE OF ANDHRA PRADESH & OTHERS Vs. LARSEN & TOURBO LIMITED AND OTHERS - (2008) 17 VAT AND SERVICE TAX CASES 1 (SC). In the said case, dealing with Andhra Pradesh VAT Act, 2005 while examining the provisions contained under Secti .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

oods were incorporated in the works and value of the said goods which constitutes the measure for levy of tax at the incorporation of goods in the works'. In laying down the said proposition, the Apex Court has referred to the judgment in the case of BUILDERS ASSOCIATION OF INDIA Vs. UNION OF INDIA - (1989) 73 STC 370 (SC) quoting the following passage found at page 400 of the said judgment - "Ordinarily unless there is a contract to the contrary in the case of works contract the proper .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

osition becomes clear, namely, that even if there is no privity of contract between the contractee and the sub-contractor, that would not do away the principle of transfer of property by the sub-contractor by employing the same on the property belonging to the contractee. This reasoning is based on the principle of accretion of property in goods. Thus, in our view, in such a case the work executed by a sub-contractor, results in a single transaction and not multiple transactions. This reasoning .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

llip;.. Therefore, in our view, the principle to be adopted in all such cases is that the property in the goods would pass to the owner/contractee on its incorporation in the works executed. This principle finds place in sub-section (7)(a) of Section 4 of the said 2005 Act." 8. A perusal of the judgment of the Apex Court would reveal that apart from interpreting the provisions contained under Section 4(7) of Andhra Pradesh VAT Act, 2005, the Apex Court has dealt with the general principle p .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rk executed by sub-contractor results in a single transaction. It is this ratio laid down by the Apex Court which the Deputy Commissioner took into consideration while giving deduction of turnover towards the amount paid to the sub-contractor by the petitioner - Company. 9. The Joint Commissioner of Commercial Taxes has not referred to the decision of the Apex Court at all. He has simply laid the entire emphasis on Rule 3(2)(i-1) of KVAT Rules. Rule 3(2) of KVAT Rules deals with determination of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

le to pay tax under the Act and that the turnover of such amounts was included in the return filed by such sub-contractor. 10. The Joint Commissioner of Commercial Taxes, in the impugned order, has held that the Assessing Authority / Deputy Commissioner of Commercial Taxes had never verified whether the sub-contractor had actually declared the turnover in the returns before allowing deduction. In his opinion, for the purpose of complying with the rule, at the time of audit proceedings, the Asses .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

t sub-contractor M/s.Venkat Sai Constructions Private Limited, Mysuru, had not declared turnover in any of the returns filed from April, 2011 to March, 2012, thus, there was clear non-compliance of the rule by the sub-contractor and therefore, the Assessing Authority was incorrect in allowing deduction of turnover of ₹ 32,89,60,004/- towards sub-contractor's turnover of M/s.Venkata Sai Construction Private Limited, Mysuru. 11. It has to be noticed here that in the rejoinder filed, peti .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

osed as Annexure-H. The rectification order dated 06.01.2016 passed in the case of the said sub-contractor by the Assistant Commissioner of Commercial Taxes, (audit)-2, Mysuru for the tax periods falling in the financial year April, 2011 to March, 2012 is also produced at Annexure-J, wherein the total contract receipts received by the sub-contractor from the petitioner amounting to ₹ 30,19,30,693 has been mentioned and the taxable turnover has been determined accordingly. 12. The reason fo .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

eclared by the Apex Court makes it clear that in case of a dealer executing works contract, the property in goods used in the construction of a building passes to the owner of the land on which the building is constructed when the goods or materials used are incorporated in the building and that the said principle is based on the principle of accretion of property in goods, apparently, there cannot be two deemed sales, one from the main contractor to the contractee and the other from the sub-con .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 

what is new what is new
  ↓     bird's eye view     ↓  


|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version