1 week Ago By Lubna
Sign In Sign Up Top Stories The Karnataka High Court ruled that the value of land under a works contract under Composition Scheme Kerala Value Added Tax (KVAT), 2005 is not subject to VAT. Read More: MS Dhoni Back as Captain: Is He Still Leading Off the Field as a Top Income Taxpayer? The Appellant/Assessee, Fortious Infradevelopers LLP, is a Limited Liability Partnership that builds residential and commercial complexes, executes civil works, and does other related tasks. It had paid taxes and submitted VAT reports for FY 2015–16.
Become PF & ESIC Pro: Basic to Advance Course – Enroll Today A reassessment notice was issued by the Assistant Commissioner of Commercial Taxes in accordance with section 39(1) of the VAT Act . According to the allegations, the total amount of contract receipts reported in the VAT 120 and VAT 240 returns was increased. If subcontractors fail to provide the certificates required by Rule 3(2)(i-1) of the KVAT Rules, 2005, the deduction claim against them may be denied.
The deduction claimed for tax collection is denied if specifics of the tax collected are not provided. Read More: CESTAT Rules in Favor of Maruti Suzuki: Allows Cenvat Credit on Catering for Business Events, Denies for Factory Workers Post-2011 Amendment 10% of the proceeds are thought to be purchases made from unregistered dealers (URDs) as the assessee failed to disclose them. According to the assessee, there was no room for SMR if the twin test was not passed.
The contested orders, which are based on a contra assumption, are flawed because the Act does not allow for the inclusion of land costs in determining the value of a works contract. The bench opined that the prescribed authority having verified all the documents, vouchers and the ledgers, accepted the total turnover. When value of land is not exigible to VAT, the authority took the turnover excluding the value of land.
Read More: Importer Aware of IEC Code Misuse: Delhi HC Upholds ₹83 Lakh Penalty in Customs Duty Evasion The Division Bench of Justices Krishna S Dixit and Ramachandra D. Huddar was addressing the issue of whether levying tax on receipt for land cost, i.e.
, immovable property, which does not constitute consideration for works contract is sustainable. Become PF & ESIC Pro: Basic to Advance Course – Enroll Today Just because there is a reduction in cash flow to the Exchequer to that degree does not mean that this is detrimental to Revenue. In the end, taxes can only be imposed with legal authorization.
According to the bench, only legally permitted and allowed funds should go to the Exchequer; not all funds, regardless of the legality of their exaction, should. While allowing the appeal, the bench held that “different contracts are signed for the sale of an undivided portion of land and a works contract.” Because they constitute the entire consideration for the works contract, the Act contemplates that the previous agreement for the sale of property would not be a subject matter of the tax and that only the total arrangement of works contracts would be considered.
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