# J.M. Housing Ltd., Noida v. The Commissioner, Commercial Tax, U.P. Lko. 862 INDIAN LAW REPORTS ALLAHABAD SERIES

- **Citation:** (2023) 7 ILRA 861
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2023-04-21
- **Case number:** Sales/Trade Tax Revision No. 333 of 2019
- **Bench:** Saumitra Dayal Singh
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/j-m-housing-ltd-noida-v-the-commissioner-commercial-tax-u-p-lko-862-indian-law-50650
- **Pages:** 32

## Headnote

appellate order granting partial reduction in
the value of goods incorporated in 'works
contract' executed by the assessee and thus
reduced the tax assessed on 'works contract'-
on the main issue, whether the constructions
raised by the assessee were by way of
execution of 'works contract', the finding has
been returned in the affirmative i.e. against
the assesse- the constructions were made by
the assesse, though on its own land against
Allotment Letter issued to and payments
made by 403 allottees- the authorities have
taxed the assesse only to the extent of
payments were received by it against 403
flats.- if the assesse had desired to claim
more deduction-it ought to have maintained
its books in accordance with Rule 9 of the
Rules-cannot
claim
those
deductions
in
absence of books of accounts to justify the
same- findings recorded by the Tribunal not
perverse.

W.P. dismissed. (E-9)

List of Cases cited:

## Text

_Characters 0–39,992 of 110,995. This is a partial read: ask again with offset=39992 for what follows._

7 All. J.M. Housing Ltd., Noida Vs. The Commissioner, Commercial Tax, U.P. Lko.
861

43. Moreover, auction sale being a
distress sale, the auction purchaser not only
purchases the property but also purchases
the liabilities attached to it. Clause 4.3 (f)
casts an obligation on the purchaser of the
property to make necessary enquiry from
the licensee in case no-dues certificate is
not obtained by the erstwhile owner and
obtain no-dues Certificate by moving an
application before the licensee, before
purchase of the property.

44. No such application has been
moved by the auction purchaser before the
licensee to make any enquiry about the
pending dues had been placed before us.
The co-extensive liability of the purchaser
to pay the outstanding electricity dues and
obtain no-dues certificate in the scheme of
the Code' 2005, in light of the clear
language of Clause 4.3 (f) (I), cannot be
confined to private sales as suggested by
the learned Senior Counsel for the
petitioner. The provision of Clause 4.3 (f),
which deals with the grant of electricity
connection on transfer of property casts an
obligation on the purchaser of the property
to make enquiries about the outstanding
electricity dues before the sale and pay the
same to obtain a no-dues certificate so as to
get a new electricity connection. The
statutory rules governing the conditions
relating to sanction of a connection or
supply of electricity empowers the licensee
to insist upon the fulfillment of the
requirement of such Rules and Regulations.
One of the conditions for supply that the
arrears due in regard to the supply of
electricity made to the premises, occupied
by the erstwhile owner, should be cleared
before the electricity supply is restored to
the premises or a fresh connection is
provided. Insistence of this condition by the
licensee in light of the statutory provisions,
noted above, cannot be said to be arbitrary
or unreasonable. This Court in exercise of
power of judicial review cannot interfere
in the same. We are, therefore, of the
considered opinion that the respondents
licensee would be well within its power
to
make
recovery
of
outstanding
electricity dues of the erstwhile owner
from the auction purchaser, namely the
petitioner-herein
by
initiating
the
proceedings for recovery of dues as
arrears of land revenue.

45. For the elaborate reasoning given
above, in view of the submissions of the
learned Senior Counsel for the review
applicant, we do not find any good ground
to recall/review the judgement and order
dated 13.9.2022, dismissing the writ
petition holding that no fault can be found
in the decision of the department not to
provide electricity connection to the
petitioner without clearing its outstanding
dues.

46. The review application is,
accordingly, dismissed being devoid of
merits. The reasoning given in the present
order of disposal of the review application
on merit be added to the reasoning for
dismissal of the writ petition in the original
order.
----------
(2023) 7 ILRA 861
REVISIONAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 21.04.2023

BEFORE

THE HON'BLE SAUMITRA DAYAL SINGH, J.

Sales/Trade Tax Revision No. 333 of 2019

J.M. Housing Ltd., Noida ...Applicant
Versus
The Commissioner, Commercial Tax, U.P.
Lko. ...Respondent
862 INDIAN LAW REPORTS ALLAHABAD SERIES
Counsel for the Applicant:
Sri Suyash Agarwal, Sri Nitin Kesharwani, Sri
Rakesh Ranjan Agarwal (Sr. Advocate)

Counsel for the Respondents:
C.S.C.

Sales/trade Tax- Revision filed against
appellate order granting partial reduction in
the value of goods incorporated in 'works
contract' executed by the assessee and thus
reduced the tax assessed on 'works contract'-
on the main issue, whether the constructions
raised by the assessee were by way of
execution of 'works contract', the finding has
been returned in the affirmative i.e. against
the assesse- the constructions were made by
the assesse, though on its own land against
Allotment Letter issued to and payments
made by 403 allottees- the authorities have
taxed the assesse only to the extent of
payments were received by it against 403
flats.- if the assesse had desired to claim
more deduction-it ought to have maintained
its books in accordance with Rule 9 of the
Rules-cannot
claim
those
deductions
in
absence of books of accounts to justify the
same- findings recorded by the Tribunal not
perverse.

W.P. dismissed. (E-9)

List of Cases cited:

1. Larsen and Toubro Limited & anr. Vs St. of
Karn. & anr., 2013 NTN (Vol.53) 65

2. K. Raheja Development Corp. Vs St. of Karn.
2005 NTN (Vol 27) 243

3. CIT Vs Sun Engineering Works (P) Ltd (1992)
4 SCC 363

4.
U.O.I.&
anr.Vs
Arulmozhi
Iniarasu
&
ors.(2011) 7 SCC 397

5. M/S Hindustan Shipyard Ltd Vs St. of Andhra
Pradesh 2000 U.P.T.C.-891

6. Suraj Lamp & Industries Pvt. Ltd. Vs St. of
Har. & anr., (2012) 1 SCC 656

7. Assotech Realty Pvt. Ltd., Delhi Vs St. of U.P.
& anr., 2007 UPTC 797

8. Express Projects Pvt. Ltd. Vs St. of U.P., 2013
NTN (53) 144

9. Supertech Ltd. NOIDA Vs Commissioner,
Commercial Tax, U.P. Lucknow, 2017 NTN (63)
136

10. The Commissioner, Commercial Tax Vs S/S
Design Arch Infra Pvt. Ltd

11. C.K. Gangadharan & anr. Vs Commissioner
of Income Tax, (2008) 304 ITR 61 (SC)

(Delivered by Hon'ble Saumitra Dayal
Singh, J.)

1. Heard Shri Rakesh Ranjan
Agarwal, Senior Advocate, assisted by Shri
Suyash
Agarwal
and
Shri
Nitin
Kesharwani, learned counsel for assessee
and Shri A.C. Tripathi, learned standing
counsel for the revenue.

2. Present revision has been filed
by the assessee under Section 58 of the
Uttar Pradesh Value Added Tax Act 2008
(hereinafter referred to as the 'Act')
against the order of the Commercial Tax
Tribunal, Bench II, NOIDA, dated
29.6.2019 passed in Second Appeal No.
52 of 2019 for the A.Y. 2010-11 (U.P.).
By that order, the Tribunal has partly
allowed
the
assessee's
appeal
and
granted partial reduction in the value of
goods incorporated in 'works contract'
executed by the assessee and thus
reduced the tax assessed on 'works
contract'. However, on the main issue,
whether the constructions raised by the
assessee were by way of execution of
'works contract', the finding has been
returned in the affirmative i.e. against
the assessee.
7 All. J.M. Housing Ltd., Noida Vs. The Commissioner, Commercial Tax, U.P. Lko.
863

3. Similar position prevails in other
revisions connected to the present revision.
Some of those revisions have been filed by
other assessees. However, learned Senior
Counsel for the assessee stated, the issue
involved in all cases is one and the same.
Also, in certain other cases, the Tribunal
has taken the opposite stand i.e. in favour
of the assessee. Thus, Sales/Trade Tax
Revision Nos. 671 of 2013, 207 of 2013,
208 of 2013, 209 of 2013, 210 of 2013 have
been filed by the revenue, raising the same
issue (from the other perspective). Learned
Standing Counsel has pointed out, those
revisions (filed by the State), had arisen
prior to the decision of the Supreme Court
in Larsen and Toubro Limited & Anr. vs
State of Karnataka & Anr., 2013 NTN
(Vol 53) 65 (hereinafter referred to as the
'L&T case').

4. In such circumstance, all the
revisions being decided today came to be
tagged. Accordingly, they were heard on
various
dates
interspersed
with
adjournments that became necessary owing
to roster changes experienced by way of
regular routine of the Court in its day-today functioning. The order itself took time
to
correct,
finalize
and
upload
on
31.5.2023, with prior oral intimation to
learned counsel for the parties.

5. For the sake of convenience and as
has been suggested by learned counsel for
the parties, the submissions were first
advanced in the present revision being
Sales/Trade Tax Revision No. 333 of 2019
(J.M.Housing Ltd vs The Commissioner
Commercial Tax) for the A.Y. 2010-11
(U.P.). Accordingly, it is being decided
first.

6. This revision was admitted on the
following questions of law:

"(i)
Whether
on
the
facts
and
circumstances of the case, the Tribunal has
erred in not distinguishing the ratio of the
decisions of the Supreme Court in the case
of K. Raheja and Larsen & Toubro to the
facts of the present case inasmuch as there
was neither tripartite agreement nor any
prior sale deed nor had the assessee
otherwise executed any works contract on
behalf of the eventual purchasers with
respect to construction raised by the
assessee on its own land?

(ii) Whether in the alternative the
Tribunal was right in sustaining the
addition of 10% in purchase of value of
goods for calculating the deemed sale,
ignoring the value of goods at the time of
incorporation of goods consumed in the
construction even though the property in
goods passes later on?"

7. No other question has been pressed
or stated to be arising in this batch of cases.
Undisputedly, the assessee claims to be the
lessee of land ad measuring 20900 sq.mtrs,
at district Gautam Budh Nagar. It further
claims to have decided to develop on that
land, a residential housing scheme - 'J.M.
Orchid', comprising of two and three
bedroom flats, numbering about 684, in all.
Without
entering
into
any
further
agreement with any developer or any third
party, the assessee then claims to have
started construction of the above described
684 flats, from its own funds. The revenue
authorities found those apartments being
constructed during the Assessment Year in
question. In that circumstance, the Special
Investigation
Branch
of
the
revenue
department
conducted
a
spot
inspection/survey of the assessee's business
activity, on 21.07.2012. At that time, it was
alleged (by the revenue authorities), 550
out
of
total
684
flats
were
being
constructed for prospective buyers. Later,
864 INDIAN LAW REPORTS ALLAHABAD SERIES
the assessee was visited with assessment
proceedings, on that issue.

8. The assessee submitted its reply to
the notice and contested the claim of the
revenue. Ultimately, the final assessment
order for the A.Y. 2010-11 was passed on
31.12.2013, by the Deputy Commissioner,
Commercial Tax, Sector 12, NOIDA. As
recorded in that order, different number of
flats were found carrying the status -
'booked' (on different dates) during that
Assessment Year. Those were specified in
that assessment order itself. The assessing
authority took a view, only 403 out of 681
flats (being constructed by the assessee),
were booked by third parties (hereinafter
described as 'allottees'). Thus 59% of the
flats being constructed by the assessee were
treated 'booked' by the allottees/third
parties. That percentage of flats has been
treated by the assessing authority to be
representative and descriptive of the extent
of 'works contract' executed by the assessee
in the project - 'J.M. Orchid', during the
assessment year in question. In proportion
to that, the assessing authority then
considered the purchase value of goods
such as iron and steel, hardware, brick,
sand, plywood, concrete, timber, cement
etc., to compute the value of goods,
incorporated in that 'works contract'. To
that value, the assessing authority added an
assumed profit @ 21%. Thus, the assessing
authority determined the turnover of goods
incorporated in the execution of the 'works
contract' at Rs. 26,32,66,106/-. On that,
total tax was computed, Rs. 1,51,32,365/-.
Adjusting the figure of ITC Rs. 84,64,027/-
, net demand of tax Rs. 66,68,338/-, was
created.

9. Against the above assessment
order, the assessee preferred statutory first
appeal. By the order dated 28.10.2017
passed by the Additional Commissioner
Grade-II (Appeal) First, Commercial Tax,
NOIDA, the assessee's appeal was allowed.
The
original
assessment
order
dated
31.12.2013 was set aside and the matter
remitted to the assessing authority, to pass a
fresh assessment order. It may be noted, the
first appeal authority had made an omnibus
observation that the assessing authority had
not considered the objections raised by the
assessee. Thus, the first appeal authority set
aside the assessment order and remitted the
matter to the assessing authority. The
assessee carried the matter to the Tribunal
in Second Appeal No. 52 of 2019. It may
be noted here, the revenue did not
challenge the order of remand made by the
first appeal authority.

10. Perusal of the record reveals, the
Tribunal has considered the submissions
advanced by the assessee on merits.
Thereafter, it has chosen to deal with the
appeal on merit issues. The assessee is not
aggrieved by that procedural approach
adopted by the Tribunal. In that, the Tribunal
has reached a conclusion, the assessee was
executing a 'works contract' to the extent of
59% of the total constructions being raised by
it i.e. 403 out of 681 residential flats in the
scheme described 'J.M. Orchid'. To that
extent, the Tribunal has confirmed the finding
of the assessing authority. As to the
quantification of turnover i.e. value of goods
incorporated in such 'works contract', the
Tribunal has altered the computation made by
the assessing authority. It has considered the
book value of goods incorporated in the
'works contract' and reduced the enhancement
made to the same (profit) to 10%.
Accordingly, it has determined the assessed
tax at Rs. 6,30,031/-.

11. Learned Senior Counsel for the
assessee has submitted, historically, tax on
7 All. J.M. Housing Ltd., Noida Vs. The Commissioner, Commercial Tax, U.P. Lko.
865
value of goods incorporation in the
execution of 'works contract' fell outside
the ambit of the legislatures. Thus, no tax
could be imposed treating the same to be
sale of goods. Only by virtue of the 46th
Constitutional Amendment made and the
consequential amendments to the State
taxation laws as also to the Central Sales
Tax Act, 1956, 'works contract' came to fall
within the ambit of the laws pertaining to
levy of tax on sale of goods. Referring to
Section 2(au) read with Section 2(ac) of the
Act, it has been submitted, for any
transaction to fall within the definition of a
'works contract' - for the purpose of
taxation under the Act, it must arise under
an 'agreement', amongst others to raise
constructions, may be of the kind the
assessee raised in the present case. Unless
that vital requirement of law is first seen -
clearly met i.e., unless the constructions are
raised
pursuant
to
a
prior
written
agreement, it may never be inferred that
such construction had been raised by way
of a 'works contract' on behalf of a person
other than the land owner. In the present
case, undisputedly the assessee is the owner
of the land over which the constructions
were being raised. As the owner and person
in absolute title and possession over the
land, the assessee chose to raise its own
constructions namely 684 residential flats,
of various specifications of its choice. For
that purpose, it arranged its finances;
applied for sanction of map from the
NOIDA; obtained sanction of map and;
started raising constructions from its own
funds. All the while, the assessee never
parted with the title or possession, either
over the land or the residential flats being
constructed by it. It did not create any
interest in any third party during the
progress of such constructions by it. In
short, it did not enter into any prior
'agreement' to raise such constructions.

12. Second, it has been strenuously
urged, the Allotment Letters (allotting 403
out 681 flats i.e. 59% of constructions
being raised) are nothing but simple
Allotment Letters that may never be
construed as any 'agreement'. Those are
unregistered documents. Such Allotment
Letters are not agreements in terms of
Section 2(au) of the Act. Those 'Allotment
Letters' did not create enforceable rights in
the allottees and to that extent 'works
contract' never arose, in the present facts.

13. Third, referring to the decision of
the
Supreme
Court
in
K.
Raheja
Development Corporation Vs. State of
Karnataka 2005 NTN (Vol 27) 243
(hereinafter referred to as the 'K. Raheja
case') and L&T case, it has been forcefully
submitted, the facts of those two cases and
therefore, the ratio laid down by the
Supreme Court is wholly distinguishable
and not applicable to the present facts.
Elaborating his submissions, learned Senior
Counsel for the assessee has submitted, in
those cases, there existed a tripartite
agreement involving the owner of the land
on one hand; the developer or the builder
(who had agreed to raise constructions on
the land of the owner), as a second party
and; allottee/prospective purchaser as a
third
party.
Arising
from
that
fact
difference, it has been urged, the owner of
the
land
never
attempted
to
raise
constructions over his land, on his own
account. In fact that land owner entered
into an agreement with the second party,
described as the developer. The latter
planned and raised constructions - for sale
to prospective purchasers. Relying on that
distinction of fact, it has been then urged,
since in that case, the owner chose to allow
another entity to raise constructions over
his land, that too under a written
agreement, the element of 'works contract'
866 INDIAN LAW REPORTS ALLAHABAD SERIES
arose, by virtue of the definition of the term
'works contract', as enacted under the
Karnataka
Sales
Tax
Act
and
the
Maharashtra VAT Act. Both enactments
contain the definition of the term 'works
contract' as may have been pari materia to
the definition of that term given under
Section 2(au) of the Act.

14. By way of second limb of the
submission thus advanced, it has been
urged, unlike Uttar Pradesh, both in the
states of Maharashtra and Karnataka, there
existed specific enactments regulating the
activity of raising constructions of such
residential apartments. Thus, in the State of
Karnataka, the Karnataka Ownership Flats
(Regulation of Promotion of Construction,
Sale, Management and Transfer) Act, 1972
(hereinafter referred to as the 'KOFA') and
in
Maharashtra,
the
Maharashtra
Ownership Flats (Regulation of Promotion
of Construction, Sale, Management and
Transfer) Act, 1963 together with the rules
framed thereunder (hereinafter referred to
as the 'MOFA'), were in force. Referring in
extenso - to the provisions of those Acts,
specifically Sections 4, 5, 6, 7, 9 of KOFA
and Sections 4, 4A, 5 of MOFA read with
stipulation contained in Rule 4, 5 and the
Model Form of agreement prescribed
thereunder, and entered into between the
promoter and purchaser of an apartment as
prescribed under the Rules framed under
MOFA, and at the same time, referring to
the relevant discussion on the same
(contained in the decision of the Supreme
Court in L&T case), it has been urged, no
such provision or law exists in the State of
Uttar Pradesh.

15. Since in the State of Karnataka
and Maharashtra by virtue of KOFA and
MOFA and the delegated law arising
thereunder, the terms of agreement were
stringently prescribed by law and further,
since it was clearly stipulated thereunder
that the builder/developer may not make
any variation or deviation contrary to that
agreement and also since, in those cases,
valuable rights were created in favour of
the allottees in presenti, whereunder they
were described as 'Prospective Purchasers',
an 'agreement' was found to have been
formed creating visible and enforceable
'works contract', as defined under the
relevant taxation laws - then in force, in the
states of Karnataka and Maharashtra.

16. Since no such 'agreement' existed
and since no such rights were ever created
in the present case and in any case, since no
such rights can ever be seen or be inferred
to be existing in favour of an allottee of any
of the 681 residential flats constructed by
the assessee, over his own land (under the
scheme 'J.M. Orchid'), no 'works contract'
existed, in view of the language of Section
2(au) of the Act. To draw a distinction from
the ratio in the decision of the Supreme
Court in K. Raheja case and the L&T
case, learned Senior Counsel for the
assessee has pressed into service another
decision of the Supreme Court in CIT Vs.
Sun Engineering Works (P) Ltd (1992) 4
SCC 363, specifically paragraph 39 of that
decision. It is his submission, in view of the
vast difference of the statutory law in the
State of U.P. as compared to the statutory
law found enforced in the State of
Karnataka and Maharashtra, it is not
permissible to apply the reasoning given in
the decisions of the Supreme Court in K.
Raheja case and L&T case, divorced from
the material statutory context in which it
had arisen. Plainly, since the statutory
context considered by the Supreme Court
in those cases is not existing in the State of
U.P., the decisions of the Supreme Court
are inapplicable. To that end, reliance has
7 All. J.M. Housing Ltd., Noida Vs. The Commissioner, Commercial Tax, U.P. Lko.
867
also been placed on another decision of the
Supreme Court in Union of India and
Another Vs. Arulmozhi Iniarasu and
Others (2011) 7 SCC 397, specifically
paragraph-14.

17. To bolster his submission further,
learned Senior Counsel for the assessee has
pressed into service yet another decision of
the Supreme Court in M/S Hindustan
Shipyard Ltd Vs. State of Andhra
Pradesh 2000 U.P.T.C.-891. Therein, the
issue involved was - whether the contract
requiring manufacture and delivery of ships
was a contract of simple sale or a 'works
contract'. Referring to paragraph-6 of the
report, it has been urged, for the purpose of
inferring existence of a 'work contract'
there is no straight jacket formula or a
quick witted test available, that may be
infallible. In absence of any standard
formula, facts and circumstance of each
case would have to be examined. Those
may make material difference to the
conclusion that may be drawn, even in
cases that may first seem to be identical, at
the superficial level.

18. Then referring to complete
absence
of
any
tripartite
agreement
between the parties and the absence of any
law creating visible rights in favour of the
allottees/Prospective Purchasers (as had
been noted by the Supreme Court in the K.
Raheja case and L&T case), it has been
urged, no element of 'works contract' exists
or has been found proven as may allow
'works contract' tax to be levied on the
assessee, with respect to any of the above
noted
681
residential
apartments,
constructed by it.

19. Unlike the facts in K. Raheja case
and L&T case under the Allotment Letters
issued by the present assessee, there is no
clause to transfer any title or right in the land
or any part of it in favour of any society.
Heavy reliance has been placed on various
clauses of the Allotment Letters, in the
present case. In that light, reliance has been
placed on the decision of the Supreme Court
in Suraj Lamp & Industries Pvt. Ltd. Vs.
State of Haryana & Anr., (2012) 1 SCC
656. Thus, it has been urged, transfer of
immovable property by way of sale can be
made only through a deed of conveyance
(sale deed). In its absence, no right, title or
interest in an immovable property may ever
arise or be created or be transferred. In that
case, it was clearly ruled, no transfer would
arise on the strength of a power of attorney.
Similarly here, the Allotment Letter creates
no conveyance in favour of the allottee. The
property with respect to which any Allotment
Letter may have been issued being an
immovable property, rights between the
parties to the Allotment Letter could be
altered only through a registered sale deed.
During the course of constructions being
made by the assessee in the Assessment
Year in question, that stage was not
reached. No sale deed came to be executed
in the year in question. In absence of any
sale deed and further, in absence of any
agreement to sell, the Court may not infer
existence
of
the
necessary
prior
'agreement', for the purpose of Section
2(au) of the Act. Once there is complete
lack of evidence as to existence of
'agreement' for the purpose of establishing
a 'works contract', the transaction being
performed by the assessee would remain
anything but a 'works contract', for the
purpose of levy of tax under the Act. Since
the transaction performed by the assessee
did not fall within the plain language of the
taxation statute, the assessee would remain
insulated from any tax that the revenue
authority seeks to impose, on such
transaction.
868 INDIAN LAW REPORTS ALLAHABAD SERIES

20. Then, in the context of the Act and
the disputes arising within the State of
Uttar Pradesh, it has been urged, the test (as
is being invoked by learned Senior Counsel
for the assessee), in the present case, has
been recognised on many occasions. First,
in Assotech Realty Pvt. Ltd., Delhi Vs.
State of U.P. & Anr., 2007 UPTC 797, a
division bench of this Court considered a
similar Allotment Letter. It was found,
despite issuance of such allotment letter,
Assotech Realty Pvt. Ltd. remained the
owner of the apartment/flats including all
constructions raised thereon, till execution
of the sale deed and its registration in
favour of the allottees. That decision
though came to be reversed by the Supreme
Court in Civil Appeal No/s. 5624-5625 of
2007 arising out of SLP No. 2237-79 of
2007, vide order dated 03.12.2007, the
principle of law laid down by the division
bench
was
neither
disapproved
nor
departed from by the Supreme Court. The
Civil
Appeal
was
disposed
of
on
consideration that the issue may be
thrashed out in statutory proceedings first,
with the further observation - the nature of
rights conferred on the allottees had to be
considered in the regular proceedings of
assessment and appeal therefrom. No
conclusion may have been reached prematurely by the writ Court before that
exercise had been made by the statutory
authorities.

21. Further, to bolster his submission,
learned Senior Counsel for the assessee has
also submitted, after the order of the
Supreme Court, Assotech Realty Pvt.
Ltd., Delhi (supra) was subjected to
regular assessment. The matter reached the
Tribunal. It allowed the appeal, vide order
dated 11.06.2010. It was rectified by order
12.07.2010 on some arithmetical/clerical
error. The revision filed by the revenue
against that order, STR/TTR Defective No.
184 of 2012 (CTT Vs. M/s Assotech
Realty Pvt. Ltd.) came to be dismissed by
a learned single Judge of this Court, vide
order dated 20.09.2012. That order has
attained
finality.
Therefore,
no
different/other view may be taken, in the
present proceedings.

22. Then, another division bench
decision of this Court in Express Projects
Pvt. Ltd. Vs. State of U.P., 2013 NTN
(53) 144 took note of the earlier division
bench decision of this Court in Assotech
Realty Pvt. Ltd., Delhi (supra) and the
order of the Supreme Court in Civil Appeal
arising from that decision and, thereafter
reiterated the principle laid down by the
Supreme Court i.e. individual facts and
evidence would have to be examined in
each case, by the revenue authorities. Thus,
that writ petition was dismissed as
withdrawn, with liberty given to that
assessee to raise appropriate challenge in
statutory proceedings.

23. Similar course is stated to have
been adopted by another learned single
Judge of this Court in Supertech Ltd.
NOIDA Vs. Commissioner, Commercial
Tax, U.P. Lucknow, 2017 NTN (63) 136.
There, the matter was remanded, applying
the test laid down by the Supreme Court in
Assotech Realty Pvt. Ltd., Delhi (supra).
Thus, no rule of thumb is available, at this
stage, to infer existence of 'works contract'
in face of Allotment Letters issued, by a
builder. Other material and evidence would
have to be examined to reach that
conclusion. Since in the present case, other
material or evidence exists, the conclusion
reached by the assessing authority as
confirmed by the Tribunal (that there
existed
a
'works
contract'),
without
considering the same, is based on no
7 All. J.M. Housing Ltd., Noida Vs. The Commissioner, Commercial Tax, U.P. Lko.
869
material
or
evidence.
Rather,
it
is
conjectural. Referring to the order of the
Tribunal, it has been submitted, the
Tribunal has not made any effort to record
any finding on that material aspect. In light
of the above, it has blindly applied the
decision of the Supreme Court in K.
Raheja case and L&T case without
ascertaining the facts of the case, first.

24. While hearing of the present
matter was continuing and it got disrupted
for roster considerations, the assessee came
to file a Supplementary Affidavit, on
22.01.2023, annexing thereto the order
dated
04.01.2023
passed
by
the
Commercial
Tax
Tribunal,
Bench-II,
NOIDA in Second Appeal No. 124 of 2022
(M/S J. M. Housing Ltd. Vs. CTT) for
A.Y. 2017-18 (upto 30.06.2017), i.e. in the
case of the same assessee. Therein, again,
in the context of similar terms of the
Allotment Letter, the Tribunal has reasoned
that
the
constructions
of
residential
apartments made by the assessee were not
by way of execution of a 'works contract'.
As such constructions were not being made
on behalf of the allottees. The constructions
were found to be raised by the assessee on
its own account.

25. On the second question, it has
been submitted, it arises in the alternative.
In the first place, the value of the goods for
the purpose of determining the turnover of
'works contract' or the value of goods
appropriated to 'works contract', has to be
the value of those goods on the date of such
goods being physically incorporated in the
'works contract'. Since the present is a case
of construction of residential apartments,
the date of appropriation/incorporation
would be the date when the goods were
physically applied or used in construction,
such that they became part of the
constructions being raised. On that date, the
value of the goods may never be more than
the purchase value or the market value of
the
goods
on
the
date
of
such
appropriation/incorporation.

26. Referring to the books of accounts
of the assessee as have been accepted, it
has been shown, the goods incorporated in
the alleged 'works contract' were valued at
Rs.
19,78,16,069/-.
Referring
to
the
grounds of appeal as raised before the
Tribunal, it has been submitted, the
assessee
never
accepted
or
admitted
addition to be made to that value @ 10%. If
at all, the value of goods alleged to have
been incorporated in a 'works contract'
should have been taken at the book value
and not more. In that context, it has been
submitted, the decision of the learned
single-Judge
of
this
Court
in
The
Commissioner, Commercial Tax Vs. S/S
Design Arch Infra Pvt. Ltd. does not
decide the issue at hand. That issue though
had arisen in that revision, it was not
pressed by the revenue. Therefore, at
present, the Tribunal has completely erred
in relying amongst other on that decision,
to make an addition of 10% to the value of
the goods incorporated in the alleged work
contract, executed by the assessee. Since
final authoritative decision had never arisen
on this issue, it was open to the assessee to
raise the issue and the Tribunal ought to
have decided the same, independent of its
earlier decisions. In that regard, reliance
has been placed on yet another decision of
the Supreme Court in C.K. Gangadharan
& Anr. Vs. Commissioner of Income Tax,
(2008) 304 ITR 61 (SC).

27. Relying on the ratio of C.K.
Gangadharan & Anr. (supra), it has been
submitted (in the alternative), merely
because certain orders of the Tribunal
870 INDIAN LAW REPORTS ALLAHABAD SERIES
passed in the case of different assessees
may not have been challenged, and thus
remained untested before this Court, no
binding precedent may have arisen for that
reason. The assessee retains a perfect right
to challenge the correctness of the findings
of the Tribunal as to 10% addition made to
the book value of the goods claimed to
have been incorporated in the execution of
the alleged 'works contract'.

28. On the other hand, learned
Standing Counsel would submit, much
water has flown since the earlier decision
of the division bench of this Court in
Assotech Realty Pvt. Ltd. (supra). Any
doubt that may have existed and any issue
that may have been perceived to be open at
that
stage,
no
longer
survives
for
consideration in view of the subsequent
authoritative
pronouncement
of
the
Supreme Court in L&T case, that decision
being a decision of a larger bench/threejudge bench of the Supreme Court. Upon
answer given to the reference made
(specifically as to correctness of the view
expressed in the K. Raheja case), the
controversy cannot be looked at except
through the prism of clarity offered by the
ratio laid down by the Supreme Court in
L&T case.

29. Referring to that decision, learned
Standing Counsel would vehemently urge,
in the context of 'works contract', in
construction industry, largely, there are two
situations. First, transactions arise where a
land owner may make constructions over
his own land, from his own funds, without
any allotment and without creating any
right or interest in any third party. There,
the land owner seeks and is granted
sanction by the relevant development or
other authority, to raise the constructions
according to the plan submitted and
approved. The constructions are raised by
such land owners from their own funds,
without any intent or agreement or
'Allotment Letter' or offer to sell (any
under-construction
building
or
part
thereof), before the constructions are
completed and made ready for use. Second,
is a type of transaction where third party
rights are created and or intervene, whether
by way of a bipartite agreement or tripartite
agreement
or
any
other
agreement
involving one or more than one other
party/parties, besides the land owner. In
those situations, Allotment Letter is issued
as a consequence of another agreement
often described as a Builder Agreement or a
Development Agreement etc; wherein (i) a
third party may agree to develop the land
owned by the land owner or (ii) the land
owner may himself enter into a bipartite
agreement with the persons who may
eventually
come
to
occupy
the
constructions being raised. In either case,
upon issuance of Allotment Letter, a 'work
contract' would arise no sooner than its
issuance, against consideration. In that case
whether
the
eventual owner
of
the
accommodation/building/part of building
etc. is described as an allottee or an
applicant or a prospective purchaser, would
remain a matter of nomenclature only. It
would not affect the nature of rights
created. Once the right to occupy the
constructions arises in favour of such other
persons (either under a bipartite agreement
entered into directly with the land owner or
a
tripartite
agreement
between
the
allotment on one hand, with the land owner
and developer on the other, or under a
similar joint-venture agreement etc.), a
right to have the construction raised - of
agreed specification and in agreed time
schedule, against an agreed payment
schedule, would itself lead to existence of a
'works contract'.
7 All. J.M. Housing Ltd., Noida Vs. The Commissioner, Commercial Tax, U.P. Lko.
871

30. Referring to the Allotment Letter,
he would submit, it creates rights of the
nature as may not have arisen except under
'works contract'. Once that 'agreement'
had arisen and the constructions were
raised
in
accordance
thereto,
the
'agreement' necessary to bring to life a
'works contract', is clearly visible and
identifiable. It is neither vague or uncertain
nor unspecified. Its terms are well defined
and written. To those terms, the assessee
has no dispute. In fact it is a self admitted
document. Its copy has also been annexed
to the supplementary affidavit brought on
record by the assessee.

31. Seen in that context and in light of
the ratio in L&T case, ownership of land,
its lack of transfer under the terms of the
Allotment Letter, possibility of deviation in
constructions being neither prohibited nor
specially regulated in the State of U.P. (as
was done in the states of Karnataka &
Maharashtra under KOFA and MOFA),
would remain issues, extraneous to the
dispute at hand. Once the 'agreement'
giving rise to the 'works contract' is
identified and it does exist, the lack of
regulatory law and the lack of transfer of
land would make no difference. What the
revenue seeks to tax is not the sale of land
(which in any case it can never do), but the
value of the goods incorporated in the
execution of such 'works contract'. It is
also not relevant whether the goods were
incorporated strictly in accordance with the
terms of the Allotment Letter i.e. without
deviation in the constructions raised or
together with certain deviations noted in
the context of building laws. Insofar as the
allottee would remain entitled to the
constructions raised by virtue of the
compliance of the terms of the Allotment
Letter i.e. payments made as and when due,
the same would include the transfer of
goods incorporated in the 'works contract'.
Its value would expose the assessee to the
levy of the tax under the Act.

32. The only situation where the
'works contract' tax liability would cease to
exist would be as contemplated in the L&T
case - i.e., where the allotment made is
cancelled by either party, for whatever
reason. In that event, subsequent to the
cancellation, the constructions made would
stand on the same footing as if raised by the
owner or the builder, as the case may be, on
his/their own account. However, up to the
stage of cancellation, the constructions
raised would remain liable to suffer the
levy of 'works contract' tax.

33. Third, it has been submitted, the
stipulations in the agreement between
builder and the allottee owner/ and or
builder and the allottee would not have the
effect of negating or rebutting the evidence
of existence of 'works contract' as had
otherwise arisen, primarily on the strength
of
the
Allotment
Letter.
Thus,
the
requirement for the levy of tax on
execution of 'works contract' was satisfied
in terms of the definition of 'works
contract' under Section 2(au) of the Act.
Once that test is seen satisfied, the inquiry
must end the consequence of law, i.e. the
levy of tax would arise by the necessary
operation of law, thereupon. It would not
remain subservient or dependent on the further
conduct of the parties to the transaction
namely, the owner and or the builder on one
hand and the allottee on the other. Only
exception thereto is the event of cancellation
of allotment. There, as noted above, the 'works
contract' would dissolve and the constructions
raised thereafter acquire the status of own
constructions of the owner or the builder, as
the case may be, as may be raised/continued
after cancellation of the allotment.
872 INDIAN LAW REPORTS ALLAHABAD SERIES

34. There is no canon of law available
as may allow the private law between the
parties to either violate or over reach the
statutory law. Since the fiscal statute is seen
to tax 'works contract', as defined, it never
remained
open
to
the
assessee
to
incorporate
artificial
clauses
in
the
Allotment Letter as may allow it to claim
that
exception
to
the
statutorily
unexceptional rule - to tax 'works contract'.

35. In any case the law with respect to
transfer of immovable property and the
mandatory
requirements
prescribed
thereunder for registration of a deed have
no bearing on the levy of tax on works
contract. That exists in a different sphere of
law governing the manner in which a deed
evidencing transfer of immovable property
may be created and registered. Section
2(au)
deliberately
does
not
employ
anything as may warrant any inference to
be drawn that unless there pre-exists a valid
and registered agreement to sell or a
registered sale deed with respect to the
under-construction building, no 'works
contract' may arise. In fact that contract
precedes a valid agreement to sell or a sale
deed, as the case may be.

36. Then referring to the provision of
KOFA and MOFA and the decisions of the
Supreme Court in K.