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HC : Quashes assessments; Allows composition benefit on construction completion post flat sale

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Denial of composition scheme to dealers engaged in construction and sale of residential apartments, buildings or commercial complexes, for post-sale construction made in terms of initial agreement with prospective buyer, illegal and contrary to provisions of Andhra Pradesh VAT Act and Rules thereunder; Where such dealers comply with conditions stipulated in Sec 4(7)(d) and Rule 17(4), composition benefit available on construction undertaken by them for very same person, after execution of registered deed for sale of semi-furnished structure; Registered deed executed for sale of semi-finished structure, and finishing / completion agreement entered into thereafter to make a fully built residential apartment fit for occupation, integrally connected with initial agreement entered between developer and prospective buyer; Tax liability of dealer, u/s 4(7)(d), is on total consideration stipulated in initial agreement for composite value of land and building, and such liability must be discharged in the month in which sale deed is executed and registered, even if it is for a semi-finished structure; Benefit which accrues to the State in prescribing a scheme for composition, i.e., reduction of the burden of tax administration, would cease if Revenue contention that benefit of composition u/s 4(7)(d) is confined only to those dealers who first construct and then sell residential apartments, is accepted; Words “construction and selling” in said Section only mean activities of both “construction” and “sale” and cannot be read as “construction prior to sale”, entire construction as specified in initial agreement would fall within the ambit of Sec 4(7)(d), not merely that part of construction undertaken prior to execution of sale deed for semi-finished structure; Referring to provisions of erstwhile Andhra Pradesh General Sales Tax Act, HC observes, “…The legislative intent of both the enactments is to extend the benefit of a distinct scheme of composition to a particular class of contractors executing works contracts of residential apartments and buildings, and not to make the benefit contingent on the stage of construction when a registered sale deed is executed for the conveyance of a semi-finished structure…”; However, clarifies that any construction made beyond the scope of initial agreement would be an independent works contract not falling within the ambit of Sec 4(7)(d), and hence taxable as per Sec 4(7)(a); Relies on plethora of judgments including SC ratio in K. Raheja Development Corpn vs. State of Karnataka, Larsen & Toubro Ltd vs. State of Karnataka, and HC decisions in Builders Association of India vs. State of Maharashtra and Mark Infrastructure Pvt. Ltd. vs. The Commercial Tax Officer  : Telangana & Andhra Pradesh HC
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