CONTINENTAL BUILDERS Vs. STATE OF KARNATAKA

JUDGEMENT

(1.) THIS revision petition is filed by the unsuccessful assessee questioning the correctness of the orders dated July 15, 2005 in S.T.A. No. 2601 of 2004 and March 16, 2006 in S.T.A. (Rev) No. 40 of 2005 passed by the Karnataka Appellate Tribunal (hereinafter called as, "the Tribunal" in short) confirming the assessment order passed against the assessee for the assessment year 1999-2000, urging various legal grounds in support of the following three substantial questions of law framed at paragraphs 13, 14 and 15 in the revision petition: 13. Whether, in the facts and circumstances of the case, the Tribunal was right in dismissing the appeal in S.T.A. No. 2601 of 2004 despite knowing that a coordinate Bench of the Tribunal had, in its judgment dated September 11, 2003, recorded a contrary finding in respect of the appeal filed by the very same petitioner for earlier assessment period ? 14. Whether, in the facts and circumstances of the case, the Tribunal was justified in rejecting the review petition although it had committed an error apparent on the face of the record by dismissing the appeal in S.T.A. No. 2601 of 2004 by dissenting from the judgment of a coordinate Bench of the Tribunal ? 15. Whether, in the facts and circumstances of the case, charges received for creation of common amenities that are not sold to any person but only a right to use thereof is provided, would be liable to tax under the provisions of the Karnataka Sales Tax Act, 1957?

(2.) THE brief facts of the case are, the petitioner is a proprietary firm engaged in real estate business and is also a developer. It has proposed to form two residential townships in an extent of 113 acres on Bellary Road belonging to one Fabian B. L. Colaco. For that purpose, it has entered into two separate agreements with the prospective buyers-(i) one for sale of plots and (ii) the other for development of barren lands by providing amenities like common road, culverts, drains, etc. THE petitioner received sale consideration towards the sale of plots under the sale agreement and development charges under the development agreement. It is stated that the amenities like roads, parks, open spaces and civic amenities have been handed over to local gram panchayat and they are not sold to the purchasers of the plots but only easementary right is provided. According to the petitioner, the same does not fall within the definition of "works contract". THErefore, for the assessment year 1999-2000, the petitioner filed "nil" turnover under the Karnataka Sales Tax Act, 1957. THE assessing authority rejected the claim of the petitioner and held that the developmental charges received by the petitioner are liable for tax under Section 5B read with Section 17(6) of the Act. Aggrieved by the same, the petitioner filed first appeal but it was dismissed. THE petitioner filed second appeal before the Karnataka Appellate Tribunal. THE Tribunal also concurred with the assessing authority and dismissed the second appeal also.

(3.) WITH reference to the above legal rival contentions, we have to answer questions framed in paragraphs 14 and 15 against the assessee for the following reasons: The Tribunal, with reference to the rival legal contentions and the undisputed facts urged by the learned Counsel for the parties, has answered the point framed by it against the assessee by recording reasons at paragraph 8 of the impugned order after referring to the undisputed facts with regard to common facilities such as putting-up compound wall, drainage, constructing club house, stores, servant quarters, providing street lighting and laying electrical and telephone lines. It is not in dispute that the materials such as sand, jelly, cement, etc., were used for construction of the common facilities referred to supra and provided the same facilities to the residents of the layout. It is also not in dispute that the sites carved out in the layout are sold to the prospective purchasers. The price of sites collected includes the developmental charges to be incurred for providing the above civic amenities. Therefore, the stand of the assessee was rightly rejected by the assessing authority and the appellate authorities that the developmental charges agreement is only for the easementary right and there is no transfer of property by way of sale such as road and park in terms of Section 2(1)(t) of the KST Act and the TP Act to the residents of the layout. The contention urged by the learned Counsel for the assessee that the assessee is not liable to pay tax under Section 5B read with Section 17(6) of the KST Act is wholly untenable in law and therefore we cannot accept the same.