Owner-developer construction can still be a works contract when pre-completion consideration is received under a construction arrangement.

Construction undertaken by a developer on its own land can still constitute a works contract where, before completion, the parties enter into an arrangement for construction for valuable consideration and payments are received under that arrangement. The ownership of the land does not exclude the expanded constitutional meaning of works contract under Article 366(29-A)(b). In such a composite transaction, the transfer of property in goods used in construction is taxable even though the end product is immovable property. On the admitted facts, the construction arrangement and receipt of funds established the essential ingredients of a works contract.

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Issues: Whether construction undertaken by a developer on its own land pursuant to an allotment arrangement and receipt of consideration constituted a works contract liable to tax.

Analysis: The existence of a works contract does not depend on whether the developer owns the land. If, before completion of construction, an arrangement is entered into for construction for valuable consideration and money is received pursuant to that arrangement, the transaction falls within the expanded meaning of works contract under Article 366(29-A)(b) of the Constitution of India. In such a composite transaction, the transfer of property in goods used in construction is taxable even though the ultimate subject matter involves immovable property. On the admitted facts, the arrangement for construction and receipt of funds established the necessary ingredients of a works contract.

Conclusion: The construction work was rightly treated as a works contract, and the answer to the first question is against the assessee.

Ratio Decidendi: A pre-completion construction agreement entered into for valuable consideration, even by the owner-developer, constitutes a works contract and permits levy on the value of goods involved in execution.

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