Section 8 KVAT: Whole contract amount excludes certified subcontractor payments, levies, pure agent sums; indivisible contracts fully taxable

HC held that under Section 8 KVAT, "whole contract amount" for compounded tax excludes payments made to registered sub-contractors when supported by prescribed certificates, and also excludes statutory levies and amounts paid as a pure agent of the customer. However, where there is a single indivisible agreement covering both already completed construction and further construction, the entire consideration, including value attributable to the completed portion, forms part of the "whole contract amount" for composition. Levy of tax on such whole contract value was upheld as tax on the works contract and not on sale of immovable property. The OT revisions were disposed of in these terms.

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Issues Involved:
1. Differential VAT demand without considering the Supreme Court ratio.
2. Deductibility of service tax from taxable turnover.
3. Deductibility of land value as per sale agreement versus registered sale deed.
4. Limitation of deduction claimed based on Form 20H.
5. Deductibility of online building tax, maintenance fund, and sinking fund.
6. Tax credit discrepancies.

Summary:

Issue 1: Differential VAT Demand
The Tribunal confirmed the differential VAT demand for the assessment years 2008-09 and 2010-11 without considering the Supreme Court's ratio in M/s. Larsen & Toubro Limited & Anr v. State of Karnataka & Anr regarding contractors paying tax at compounded rates. The court found against the assessee on this issue, stating that the "whole contract amount" includes the completed portion of the building at the time of entering into the agreement.

Issue 2: Deductibility of Service Tax
The Tribunal held that service tax included in the contract receipts is not deductible from the taxable turnover since the petitioner opted for payment of tax under Section 8(a) of the KVAT Act. The court remanded this issue to the Assessing Authority, stating that amounts collected by the petitioner as a "pure agent" of the customer and paid to statutory authorities cannot be included in the "whole contract amount."

Issue 3: Deductibility of Land Value
The Tribunal held that land value as per the sale agreement is not deductible, only the land value as per the registered sale deed is deductible. The petitioner chose not to press this issue, and hence, it was not answered by the court.

Issue 4: Limitation of Deduction Claimed Based on Form 20H
The Tribunal limited the deduction claimed by the petitioner for the AY 2008-09 to Rs. 11,00,88,027/- despite the petitioner producing Form 20H amounting to Rs. 11,45,21,298/-. The court remanded this issue to the Assessing Authority for verification, as the detailed statement produced indicated that the petitioner should have been granted the benefit of deduction for the full amount.

Issue 5: Deductibility of Online Building Tax, Maintenance Fund, and Sinking Fund
The Tribunal held that online building tax, maintenance fund, and sinking fund collected from customers should not be deducted from the taxable turnover since the petitioner opted for payment of tax under Section 8(a) of the KVAT Act. The court remanded these issues to the Assessing Authority for exclusion from the computation of "whole contract amount" if proven to be expenses incurred by the petitioner as a pure agent.

Issue 6: Tax Credit Discrepancies
The petitioner claimed to have paid a total tax of Rs. 36,08,465/- during the AY 2010-11, but credit was given only for Rs. 22,70,735/-. The court remanded this issue to the Assessing Authority for factual verification and to give due credit if proven through challans.

Conclusion:
The court disposed of the O.T. Revisions by:
1. Answering Question No. (1) against the assessee and in favor of the Revenue.
2. Remanding issues in Questions Nos. (2) and (4) in O.T. Revision No. 87/2018 and Questions Nos. (2), (4), (5), and (6) in O.T. Revision No. 93/2018 to the Assessing Authority for verification.
3. Not answering Question No. (3) in both O.T. Revisions as the petitioner did not press this issue.

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