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Issues: (i) whether the appellant acquired ownership of the land in the absence of a registered conveyance and could rely on part performance to claim that status; (ii) whether agreements with prospective flat purchasers under the ownership-flats scheme constituted works contracts rather than sales of immovable property; and (iii) whether tax was leviable under section 5-B of the Karnataka Sales Tax Act, 1957 on the transfer of property in goods involved in such construction activity, with composition under section 17(6) and reference to the sale price of the flats.
Issue (i): whether the appellant acquired ownership of the land in the absence of a registered conveyance and could rely on part performance to claim that status
Analysis: A contract for sale of immovable property does not by itself create any interest in the property. In the absence of registration, title does not pass merely because consideration has been paid and possession may have been given. The equitable doctrine of part performance under section 53-A of the Transfer of Property Act, 1882 operates only as a shield and not as a sword, and cannot be used to establish ownership. The absence of a registered instrument therefore prevented the appellant from being treated as the owner of the land.
Conclusion: The appellant was not the owner of the land for the purpose of the dispute.
Issue (ii): whether agreements with prospective flat purchasers under the ownership-flats scheme constituted works contracts rather than sales of immovable property
Analysis: The agreements were entered into before completion of construction, with the purchaser selecting the plans and specifications and acquiring a right in the undivided share of land relatable to the flat to be constructed. In building contracts, absolute ownership of the land is not necessary and even a limited interest may suffice. After the Forty-sixth Amendment, a works contract is divisible into a transfer of property in goods and supply of labour and services. On the facts, the appellant was constructing flats for the agreement holders as promoter and contractor, not selling pre-existing flats as owner.
Conclusion: The transactions were works contracts and not sales of immovable property by the appellant as owner.
Issue (iii): whether tax was leviable under section 5-B of the Karnataka Sales Tax Act, 1957 on the transfer of property in goods involved in such construction activity, with composition under section 17(6) and reference to the sale price of the flats
Analysis: Section 5-B of the Karnataka Sales Tax Act, 1957 levies tax on the transfer of property in goods involved in the execution of works contracts, and civil construction is covered within that scheme. Since the construction agreements were works contracts, the transfer of property in goods embedded in the construction was taxable. Section 17(6) permits composition in respect of such liability. The attempt to treat the entire sale price of the flats as consideration for a sale of immovable property was not accepted, because the taxable element was the goods transferred in the execution of the works contract.
Conclusion: Tax under section 5-B was leviable on the works contracts, and the appellant's challenge to the tax treatment failed.
Final Conclusion: The construction activity was held to be works contract activity involving taxable transfer of property in goods, the appellant could not claim ownership of the land without registration, and the appeals therefore failed.
Ratio Decidendi: Where a promoter undertakes construction of flats under agreements with prospective purchasers before completion, the transaction is a works contract attracting tax on the transfer of property in goods under the post-Forty-sixth Amendment regime, and ownership of immovable property does not pass without a registered conveyance.
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