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of <h1>Builders can claim composition benefit for post-sale construction under Section 4(7)(d)</h1> <h3>Omega Shelters (P) Limited. Versus The Asst. Commissioner (CT) (LTU) O/o The Dy. Commissioner (CT), Secunderabad</h3> Omega Shelters (P) Limited. Versus The Asst. Commissioner (CT) (LTU) O/o The Dy. Commissioner (CT), Secunderabad - [2015] 83 VST 51 (T&AP) Issues Involved:1. Conflicting Advance Rulings2. Submissions Beyond the Impugned Orders3. Eligibility for Composition under Section 4(7)(d) Post-Sale4. Distinction Between Pre-Sale and Post-Sale Works Contracts5. Consideration for Finishing Works6. Legislative Intent and Historical ContextDetailed Analysis:I. Conflicting Advance Rulings:The petitioners contended that the rulings in Maytas Hill Country Pvt. Ltd. and Sai Sree Developers (P) Ltd. were applicable and binding as per Section 67(4) of the Act. The assessing authorities failed to follow these rulings, instead relying on conflicting rulings in M/s Madhu Collections and M/s Lumbini Constructions (P) Ltd. The court noted that conflicting rulings create confusion and emphasized the need for uniformity in tax administration. The court aimed to resolve the uncertainty by interpreting Section 4(7)(d) of the Act.II. Submissions Beyond the Impugned Orders:Petitioners argued that the revenue's submissions exceeded the scope of the assessment orders and counter affidavits. The court found it unnecessary to address this contention as the interpretation of Section 4(7)(d) is a pure question of law that can be raised at any stage, even for the first time in writ proceedings.III. Eligibility for Composition under Section 4(7)(d) Post-Sale:Petitioners argued that Section 4(7)(d) does not exclude the composition facility for post-sale construction. They claimed that both the sale deed and the construction agreement are integral parts of the initial agreement, and the entire tax liability was discharged upon registration of the semi-finished flat. The court examined the statutory provisions and held that the liability to pay tax under Section 4(7)(d) includes the total consideration received or receivable for the composite value of land and building, from commencement to completion of construction.IV. Distinction Between Pre-Sale and Post-Sale Works Contracts:The court rejected the revenue's contention that post-sale construction constitutes a separate works contract. It emphasized that the entire construction, as specified in the initial agreement, falls within the ambit of Section 4(7)(d). The court noted that the artificial severance of the identity of the purchaser before and after the sale deed does not align with the plain language of Section 4(7)(d).V. Consideration for Finishing Works:The court held that the consideration for the finishing works is part of the initial agreement. The tax liability under Section 4(7)(d) is on the total consideration stipulated in the initial agreement, which includes the value of land and the completely constructed building. The court clarified that any construction beyond the scope of the initial agreement would be an independent works contract, taxable under Section 4(7)(a).VI. Legislative Intent and Historical Context:The court referred to the APGST Act and the distinction made between general works contracts and those for constructing apartments and buildings. It noted that this distinction continued under the AP VAT Act, reflecting the legislative intent to extend the benefit of a distinct composition scheme to contractors of residential apartments and buildings. The court emphasized that the benefit of composition under Section 4(7)(d) is not contingent on the stage of construction when a registered sale deed is executed.Conclusion:The court concluded that dealers engaged in the construction and sale of residential apartments, houses, buildings, or commercial complexes who exercise the option under Section 4(7)(d) and comply with the conditions cannot be denied the benefit of composition for post-sale construction. The impugned assessment orders were set aside, and the assessing authorities were directed to re-examine the matter in light of the court's findings and pass fresh orders in accordance with the law. The writ petitions were disposed of accordingly, without costs.
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