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TMI Blog2016 (9) TMI 519X X X X Extracts X X X X X X X X Extracts X X X X ..... of is generally assigned to sub-contractors. For example, in Civil Appeal No. 2956 of 2007, the assessee had secured a contract to construct an indoor stadium styled 'Sree Kanteerava Indoor Stadium' in Bengaluru and the assessee assigned the work of finding their own materials and laying foam concrete to M/s. Lloyd Insulation (India Limited). This sub-contractor was registered with the Deputy Commissioner of Commercial Taxes, Assessment-IX City Division, Bengaluru, and accordingly it had submitted returns and paid taxes for the execution of the works contract and was duly assessed under Sections 5-B and 6-B of the Karnataka Act. A certificate dated April 10, 1998 to that effect had been marked before the authorities. Likewise, returns are filed by the assessee as well on regular basis. In the course of the assessment, the assessee submitted that the sub-contractors were the parties who executed the works contract and since the transfer of property involved in such execution had already been taxed, the appellant cannot be taxed again under Section 6-B of the Karnataka Act there being only one taxable event for the purpose of Article 366(29A)(b) of the Constitution of India. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee. Against that order, the Revenue is in appeal. 5) The aforesaid brief resume of the three appeals makes it clear that the question of law involved in all these three cases is the same, though the two sets of judgments of the High Court are contrary to each other. 6) It may be pointed out at this juncture itself that in the case of this very assessee same question of law had arisen, albeit in the context of Andhra Pradesh Value Added Tax Act, 2005 (hereinafter referred to as the 'Andhra Pradesh Act'). This Court has decided the issue in its judgment known as State of Andhra Pradesh & Ors. v. Larsen & Toubro Limited & Ors. (2008) 9 SCC 191 (hereinafter referred to as 'Andhra Pradesh judgment'). The question of law is answered in favour of the assessee. Taking aid of the said judgment, the assessee has argued that the instant appeals should be decided in its favour. On the other hand, plea of the Revenue is that that view taken by the High Court, which is in favour of the Revenue, is the correct view and should be maintained having regard to the provisions of the Karnataka Act. The endeavour of the Revenue is to demonstrate that the provisions of the Andh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 'sale'. 'Sale' is defined as transfer of the property in goods by one person to another in the course of trade or business for consideration and it, inter alia, includes a transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract. Thus, even in respect of works contract whenever there is a transfer of property in goods, that is deemed as 'sale'. 9) An essential element to constitute a transaction as 'sale' is the transfer of property in goods. Aggregate amount for which the goods are bought or sold, or supplied or distributed or delivered or otherwise disposed of, in any of the ways referred to under Section 2(t), by a dealer is treated as 'turnover' within the meaning of Section 2(v) of the Karnataka Act. There are two variants of this turnover known as 'taxable turnover' and 'total turnover', the definitions whereof are already reproduced above. 'Total turnover' is defined as aggregate turnover in all goods of a dealer at all places of business in the State. However, from this aggregate turnover, certain deductions are permissible under the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is payable on 'taxable turnover of transfer of property in goods'. Additionally, in those cases where total turnover of a registered dealer in an year is not less than the turnover specified in sub-sections (1) and (2) of Section 10, such a dealer is liable to pay tax at the rate specified in Section 6-B of the Karnataka Act. 13) The question for determination is: for calculating the turnover for the purpose of payment of turnover tax under Section 6-B of the Karnataka Act, whether payments made to sub-contractor are to be included while calculating the total turnover? 14) Mr. N. Venkatraman, learned senior counsel appearing for the appellant/assessee, made a fervent plea for not including such payments made to the sub-contractor, as component of total turnover, because of the reason that the sales tax is payable on the transfer of property and the 'turnover' also meant aggregate amount for which goods are bought or sold, etc. Therefore, transfer of property in goods was the necessary concomitant in ascertaining the sale and, thus, in the process calculating the turnover/total turnover. It was submitted that there was no sale of goods involved in the execution of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent which has taken the view in favour of the Revenue. He submitted that one had to keep in mind the distinction between Section 5-B and Section 6-B of the Karnataka Act by pointing out that when it comes to levy of turnover tax, it speaks of 'total turnover', whereas tax payable under Section 5-B is on the 'taxable turnover'. He submitted that since we are concerned with the levy of tax under Section 6-B of the Karnataka Act, total turnover becomes relevant and, therefore, the value of the work entrusted to the sub-contractors is includible at the hands of the assessee. He further submitted that the High Court was right in pointing out that sales tax is leviable at a single point, whereas turnover tax is leviable at a multi-point, both at the hands of the main contractor and sub-contractor and, therefore, the question of double taxation does not arise. 17) After bestowing our due consideration to the respective submissions, we find that the position taken by the assessee has to prevail, which appears to be meritorious. This result follows even from the bare perusal of the Karnataka Act and Rules. For this purpose, it becomes important to refer to clause (c) of sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontractor. The site was occupied by the sub-contractor and the materials were erected by the sub-contractor. In this backdrop, after taking note of some provisions of the Andhra Pradesh Act, the Court explained the legal position in the following manner: "16. By virtue of Article 366(29-A)(b) of the Constitution, once the work is assigned by the contractor (L&T), the only transfer of property in goods is by the sub-contractor(s) who is a registered dealer in this case and who claims to have paid taxes under the Act on the goods involved in the execution of the works. Once the work is assigned by L&T to its sub-contractor(s), L&T ceases to execute the works contract in the sense contemplated by Article 366(29-A)(b) because property passes by accretion and there is no property in goods with the contractor which is capable of a retransfer, whether as goods or in some other form. 17. The question which is raised before us is whether the turnover of the sub-contractors (whose names are also given in the original writ petition) is to be added to the turnover of L&T. In other words, the question which we are required to answer is whether the goods employed by the sub-contractors occu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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