M/S. Jaya Bharathi Constructions (P) LTD. vs. Commercial Tax Officer
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The petitioner, M/s. Jaya Bharathi Constructions (P) Ltd., is a private limited company engaged in construction. For the assessment year 2002-03, it undertook construction of a residential complex and opted to pay tax under the composition scheme as per Section 5G of the Andhra Pradesh General Sales Tax Act, 1957 (APGST Act), at a rate of Rs. 4/- per square foot on the total constructed area. However, the Commercial Tax Officer, the first respondent, passed a best judgment assessment order on March 31, 2006, levying tax on the entire turnover at 8% under Section 5F of the APGST Act, ignoring the petitioner's composition scheme option. The petitioner sought to quash this order and stay the collection of the disputed tax of Rs. 20,59,032/-.
Held
The Court held that the impugned best judgment assessment order passed by the first respondent could not be sustained. While acknowledging the respondents' contention that the benefit of the composition scheme under Section 5G is available only if a dealer opts to pay tax on the total constructed area and not just their share, the Court noted the absence of specific details to conclusively determine this. However, referencing its prior decision in W.P.No.5791 of 2008, the Court reiterated that once an option to pay tax under the composition scheme (Section 5G) is exercised, revenue authorities cannot levy tax under Section 5F. Therefore, the matter was remanded to the first respondent for de novo verification to ascertain whether the petitioner had exercised the option to pay tax under the composition scheme for the total constructed area or only a part of it. The assessment proceedings were directed to be completed within three months, considering the repeal of the APGST Act.
Key Issues
1. Whether the assessment order passed by the first respondent, levying tax under Section 5F of the APGST Act, is sustainable when the petitioner had opted to pay tax under the composition scheme as provided under Section 5G of the Act? Petitioner's arguments: The petitioner contended that once a dealer exercises the option to pay tax under the composition scheme on the total constructed area, the revenue authorities cannot levy tax under Section 5F of the Act, ignoring the exercised option. They relied on the High Court's judgment in M/s. Sirla Builders Private Limited v. The Commercial Tax Officer, which held that revenue authorities cannot levy tax under other provisions if a dealer opts for composition under Section 5G. The petitioner also argued that their claim of paying tax only on the area that fell to their share under a development agreement, as stated in the writ petition, indicated they did not offer tax on the total constructed area under Section 5G. Respondents' arguments: The respondents sought to justify the levy under Section 5F, citing Rule 6(2) of the APGST Rules, 1957, based on an inspection that found the petitioner disclosed a lesser constructed area than actually completed. They further contended that the petitioner's plea about paying tax only on their share of the area indicated they did not opt for composition on the total constructed area, thus justifying the assessment under Section 5F.
Sections Cited
Section 5F, Section 5G, Rule 6(2)
AI-generated summary — verify with the full judgment below
Cause title — parties, addresses and appearances
The Court made the following: ORDER That Ru[e Nisi has been made Absolute as above witness
l T} E HON'BLE SRI JUSTICE T. VINOD Kt'MAF AND TI IE HON'BLE SRI JUSTICE E.V.VENUGoP,AL Writ Petition N .18938 of 2006 ORDER:1per lcnble Sri Justrce T.Wnod Kumar) This \ lrit Petition is filed for issue of a Writ ot' C,?rtiorari to quash the in p:gned best judgment assessment order dt.-i1.03.2006 passed :y he l't respondent in G,I.No.4190/201.1-03, for the assessment l ear 2002-03 (APGST), insofar as subjectinr:; the turnover relating to e) -.(:ution of works contract to tax at Bolo L n(ler Section 5F of the Andhr : Pradesh General Sales Tax Act, 1957 i,br short, ,the Act'), as illegi l, arbitrary and highhanded.
Heard Sri S.Suri Babu, learned counsel for the f)etitioner, and Sri K.Raji Re ldy, learned Senior Standing Counsel a6,p,::arirrg for the respondents, :nd perused the record.
Petitio ,er contends that it is a private Lirniled Company engaged, in,er alia, in construction and sale oF residontial and commercial ()rnplexes; that during the year 2002-03, it undertook construction ,f residential complex and had opted for p,:ryment of tax under compo ;ition scheme as provided under Section 5 G cf the Act; and that, in s )ite of the petitioner opting to pay tax unl6tr composition scheme at th: -ate of Rs.4/- per square feet on the to:;:tl constructed
'-f*+ ? area as permitted by the concernecj authority, the 1$ respondent has assessed the petitioner to tax under Section 5F of the Act by impugned order dt.31.03.2006, in contravention oi provisions of the Act.
Petitioner further contends that once a dealer exercises option to pay tax under composition scheme on the total constructed area, it is not open for the respondent authorities to levy tax under Section 5F of the Act, ignoring the composition option exercised by the petitioner. In support of the above contention, learned counsel for the petitioner has placed reliance on the judgment of this Court in the case of M/s.Sir{a Builderc Private Limited v. The Commercial Tax Officer, Hydernagar Circle, Ranga Reddy Districtl, wherein this Court, by taking note of the works contract manual containing the guidelines, relating to levy of tax on works contract as issued by the Commissioner of Commercial Taxes, Nampally, Hyderabad, and also having regard to the provisions of Section 5G of the Act, had held that once a dealer exercises his option to pay tax under Section 5G of the AG on the basis of constructed square feet area, it is not open for the respondent authorities to levy tax under any other provision, ignoring the option exercised under composition scheme and the certificate in Form L1 issued by the authorities accepting such composition. ' w.p.No.s791 of 2oo8 dt.13.12.2022 l
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A Cou rter-affidavit flled on behalf of the respon(J:1ts is flled.
While :he specific averment of the petitioner in t1.3 writ affidavit is that i: he 1 opted to pay tax under composition ;r:herne as per Section 5G o the Act, there is no denial of the said st lti)m€,nt. In the counter-affid rvt filed, the respondents, on the othe- hanl, seek to justify the le' y of tax under Section 5F of the Act, real ,,vitfr Rule 6(2) of the Andhr r Dradesh General Sales Tax Rules, 1957, rn the ground that during tl e inspection of the business premises of tre pr:titioner, it was Found tt at the petitioner had disclosed a lesser (r)'rstrrcted area than the actl rl constructed area completed.
Learn(l Senior Standing Counsel appearing o1 befalf of the respondents vould further contend that having regarrl lo t.re plea of the petitioner irr the present writ petition that it is only rt,rquired to pay tax on the ar:a that has fallen to the share of the petit:ic,ner under the development sqreement and not on the total constructe,d area in square feet, i self indicates that the petitioner did not cf'er to pay tax on the total onstructed area in square feet under Sect on 5G of the Act, and ther( fc,re, the assessing authority is justified in (rvying tax. B. No re- oinder affidavit has been filed by the p€t tioner to the said counter r ffidavit.
W€ ha'e taken note of the respective contentionr; r.Lrged.
4
Though it is the specific case of the petitioner of having opted to pay tax in terms of composition scheme under Section 5G of the Act, the petitioner did not choose to file any document to indicate as to what is the total constructed area that has been permitted by the concerned authority, and also the option form in Form L, as submitted before the 1s respondent authority, which would disclose as to whether the petitioner had offered to pay tax under Section 5G of the Act on the total constructed area or only to the extent of constructed area that has fallen to its share.
As rightly contended by the learned Senior Standing Counsel appearing on behalf of the respondents that the benefit of composition scheme under Section 5G of the Act would be available if only a dealer exercises option to pay tax on the total constructed area and not on the area that has fallen to its share under an agreement entered with the land owner. However, in the absence of such details being available for consideration by this Court, the claim of the petitioner cannot be accepted straight away. L2. Fufther, the counter-affidavit also does not deal with the said aspect as to whether the petitioner had exercised option to pay tax under composition scheme, only in respect of part of the constructed area or of the total extent of the constructed area of the building as 5 contended b r the learned Special Standing Counsel. liince these facts are gerrnan, to the issue on hand, this Court ref.,l ns itself from expressing e r) view as to the eligibility or otherwise ot'th(r petitioner to claim ben, fi: under composition of tax or that of th€ rr:spr:ndents for sustaining th : r emand of tax made under Section 5F of Lhe ,\ct.
Howe'er', having regard to the decision oi' this Court in W.P.No.5;791 of 2008, wherein this Court had categr,rir:ally held that once an opti )n is exercised to pay tax under composil.irtn ,;66sn',", 1n terms of Se, tirtn 5G oF the Act, it is not open for r:he respondent authoriti€rs t( levy tax by applying the provisions of S3(.tior 5F of the Act, this r:out : is of the view that the impugned order cf assessment as passed by tt: 1sr respondent authority cannot be sustained and the matter requir rs to be considered afresh by the 1'r resprtrJent authority by looking in l the option exercised by the petitioner t3 ray tax under composition : :heme in Form L and the acceptance of trr,, sa d form by the lst respor lent authority by issuing Form L1 thereurclr,rr.
Accord nqly, the impugned order dt.31.03,2006 pcssed by thet respondent is set aside and the matter is remanded tr;:rck to the 1.t respondent t( cause de novo verification as to wheth€r the petitioner had exercise I option to pay tax under compositirtr 56 6.r. O, submittinrl F( rnr L for the total extent of constructr:,1 arr:a of the t t \
6 \ building as approved by the concerned building permission sanctioning authority or only for part of the area that has fallen to the share of the petitioner, and pass orders afresh in accordance with law thereon.
However, taking note of the fact that the assessment rerates to the year 2002-03 under the APGST Act, 1957, which has been repealed with the intrcduction of Value Added Tax Act, 2005, and the VAT Act also having been repealed with the introduction of Goods and services Tax Act, with efFect from 01.07.2017, this court is of the view that the time for re-doing the assessment is to be restricted. Accordingly, the 1s respondent is directed to complete the assessment proceedings de novo as expeditiously as possible, preferably within a period of three months from the date of communication of the order after affording sufficient opportunity to the petitioner.
Subject to the above direction, the Writ petition is allowed. Pending miscellaneous petitions, if any, shall stand closed in the light of this final order. No order as to costs. The Hon'ble SRI UJJAL BHUYAN, The Chief Justice on this Tue ay' The Fourteenth Day Of March, Two Thousand And Twenty Three T. JAYAS/EE ASSISTANT REGIS/RAR //rRUE coPY// sEcrtoN otircen To,
Commercial Tax Officer, Maredpally Circle, Hyderabad.
Assistant Commissioner (CT), Punjagufta Division, Hyderabad.
One CC to SRI S. SURI BABU, Advocate [OPUC]
One CC to SRI K. RAJI REDDY, SC FOR COMMERCIAL TAX [OPUC]
Two CD Copies BNY U
t I HIGH COURI DATED:1 410i12023 ORDER WP.No.1893t of 2006 ALLOWING '1 HE WRIT PETITION WITHOUT C()STS ,,,.. a < (: (- l. I //, -.\ ',_) t) ',t.}.'['s'] s? i i I i I
Reproduced from the public record of the Telangana High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.