Works contract tax on developer construction fails where builder retains ownership until sale deed execution and registration.

Construction by a developer is taxable as a works contract only if it is carried out for and on behalf of the purchaser under an agreement involving transfer of property in goods in execution of that contract. On the facts stated, the builder retained ownership of the apartments and the construction until execution and registration of the sale deed, and instalment payments did not give the allottees any right, title or interest. The activity was therefore not a works contract under the U.P. Trade Tax Act, and the tax levies were without jurisdiction. The writ petitions were maintainable because the challenge went to the very existence of taxing jurisdiction, so the alternative appeal remedy was not an absolute bar.

---

---

Issues: (i) Whether the petitioner's construction activity amounted to execution of a works contract for and on behalf of the prospective allottees so as to attract tax under the U.P. Trade Tax Act, 1948. (ii) Whether the writ petitions were maintainable despite the alternative statutory remedy of appeal.

Issue (i): Whether the petitioner's construction activity amounted to execution of a works contract for and on behalf of the prospective allottees so as to attract tax under the U.P. Trade Tax Act, 1948.

Analysis: Under the Act, tax on works contract arises only where there is an agreement for carrying out construction for cash, deferred payment, or other valuable consideration, and the transfer of property in goods occurs in execution of such contract. The allotment letters showed that the petitioner retained ownership of the apartments and the construction until execution and registration of the sale deed. The allottees acquired no right, title, or interest merely by making instalment payments, and the payment schedule did not convert the construction into work done on behalf of the purchasers. On the facts, the petitioner was constructing in its own right and not as a contractor for the prospective allottees.

Conclusion: The activity did not constitute a works contract under the Act, and the impugned tax orders were without jurisdiction and unsustainable.

Issue (ii): Whether the writ petitions were maintainable despite the alternative statutory remedy of appeal.

Analysis: The availability of an alternative remedy does not bar writ jurisdiction where the impugned action is wholly without jurisdiction or where the jurisdictional fact itself is absent. Since the core challenge was that no taxable works contract existed at all, the question went to the authority's competence to levy tax. In such a situation, the statutory appeal was not an absolute bar to the exercise of writ jurisdiction.

Conclusion: The writ petitions were maintainable notwithstanding the alternative remedy.

Final Conclusion: The tax levies on the construction activity could not be sustained, and the petitions were allowed with the impugned assessment orders set aside.

Ratio Decidendi: Construction by a developer is taxable as a works contract only when it is undertaken for and on behalf of the purchaser under an agreement; where the builder retains ownership and the purchaser acquires rights only upon execution and registration of the sale deed, the transaction is not a works contract liable to such tax.

---