Composite computer education contract treated as works contract; transfer of property in goods remained taxable.

A composite agreement for computer education in schools, including supply, installation, maintenance and eventual transfer of hardware, software and accessories, was treated as a works contract under the A.P. General Sales Tax Act. Applying Article 366(29-A)(b), the court held that a composite contract may be split for sales tax purposes where it contains both service elements and transfer of property in goods, and that the dominant intention test is not decisive after the Forty-sixth Amendment. Tax under Section 5-F on the transfer of property in goods involved in execution was therefore upheld.

---

---

Issues: Whether the agreement dated 29.06.2002 for imparting computer education in schools with supply, installation and eventual transfer of computer hardware, software and accessories was a works contract under Section 2(1)(t) of the A.P. General Sales Tax Act, 1957 and whether the turnover attributable to transfer of property in goods was taxable under Section 5-F of that Act.

Analysis: The agreement was examined as a whole in the light of Article 366(29-A)(b) of the Constitution of India and the settled law that a composite contract may be split for the purpose of sales tax where it contains both service and transfer of property in goods. The arrangement required the petitioner to install and maintain equipment, provide software and teaching material, operate the centres for a consideration payable in instalments, and hand over the installed equipment in working condition at the end of the contract. The Court held that the dominant intention test was no longer determinative after the Forty-sixth Amendment and that a contract need not be confined to a pure building contract to fall within the term works contract. It further held that transfer of property in goods could be taxed when the goods were incorporated in the works, even if ownership passed later.

Conclusion: The agreement was held to be a works contract and the levy of tax under Section 5-F on the transfer of property in goods involved in its execution was upheld.

Final Conclusion: The writ petitions failed because the impugned assessments and revision orders were sustained as the contract was treated as exigibly taxable under the works contract provision.

Ratio Decidendi: A composite contract that includes both supply of goods and rendering of services is taxable as a works contract where the contract involves transfer of property in goods in the execution of the work, and the dominant nature of the contract is not decisive after Article 366(29-A)(b).

---