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2010] Skyline Constructions & Housing (P.) Ltd. v. AC&AR (Kar.) 173<br />
A<br />
B<br />
C<br />
D<br />
E<br />
F<br />
G<br />
[2010] 1 GST 173 (KAR.)<br />
HIGH COURT OF KARNATAKA<br />
Skyline Constructions & Housing (P.) Ltd.*<br />
v.<br />
Authority for Clarification and Advance Rulings, Bangalore<br />
K.L. MANJUNATH AND ARAVIND KUMAR, JJ.<br />
ST APPEAL NO. 24 OF 2006<br />
NOVEMBER 17, 2009<br />
WORKS CONTRACT - Taxability of - Whether once a work is assigned by<br />
contractor to its sub-contractor, contractor ceases to execute work<br />
because property passes by accretion and there is no property in goods<br />
left with contractor which is capable of retransfer either as goods or in<br />
any other form - Held, yes - Whether, therefore, transfer of property is<br />
from sub-contractor to contracting party that is contractee, namely,<br />
recipient - Held, yes - Whether, in such a situation, payments made by<br />
contractor to sub-contractors cannot be brought within total turnover<br />
of contractor as such an interpretation would lead to double taxation -<br />
Held, yes [Section 4 of the Karnataka Value Added Tax Act, 2003]<br />
FACTS<br />
The assessee was a registered dealer under the Act. It was engaged in the<br />
execution of the works contract for construction of residential apartments.<br />
It was paying tax at 4 per cent in terms of Notification No. FD 54 CSL<br />
2005(7), dated 23-3-2005. In course of the execution of the works contract,<br />
it claimed to employ sub-contractors who were also said to be registered<br />
under the KVAT and were paying taxes as per the provisions of the Act and<br />
the rules made thereunder. The assessee sought for an advance ruling<br />
under section 60 read with rules 163 to 165 of the KVAT Rules, 2005 as to<br />
whether the works entrusted to sub-contractors would also come within<br />
the total turnover of the assessee.<br />
The AAR held as follows : (a) In the absence of specific provisions for<br />
deduction on the turnover of the sub-contractors <strong>up</strong> to 31-3-2006, the<br />
activity of the works contract was exigible to tax at the rate applicable for<br />
goods involved in the transfer of property under the Act and section 4(c)<br />
with effect from 1-4-2006; (b) the payments made to the sub-contractors<br />
were not eligible for deduction <strong>up</strong> to 31-3-2006; and (c) the sub-contractors’<br />
turnover was eligible for deduction with effect from 1-4-2006 by<br />
virtue of notification, dated 27-5-2006.<br />
*In favour of assessee.<br />
GOODS & SERVICES TAX CASES ❑ JANUARY 20 - FEBRUARY 4, 2010 ◆ 49