Works contract taxation extends to pre-completion flat sale agreements where construction is undertaken for consideration.

An inclusive statutory definition of "works contract" can cover a developer's agreement to construct and sell flats or commercial units before completion. The decisive factor is that the arrangement is entered into for consideration before construction is finished, even if the developer retains contractual rights on purchaser default or asserts an ownership or development interest. Ownership rules under property law do not alter the tax characterisation under the sales tax statute. On that basis, the transfer of property in goods involved in the construction is taxable, and turnover tax is leviable on the developer's construction activity.

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Issues: Whether a developer who enters into agreements for construction and sale of flats or commercial units before completion carries on a works contract under the Karnataka Sales Tax Act and is liable to turnover tax on the transfer of property in goods involved in such construction.

Analysis: The statutory definition of "works contract" is an inclusive and wide one, extending to any agreement for carrying out building or construction for cash, deferred payment, or other valuable consideration. It is not confined to the conventional notion of a contract executed only on behalf of another, and the identity of the person carrying on construction is not decisive. The agreements showed that the developer undertook construction for prospective purchasers as part of a package arrangement, with payment in instalments and the construction to be completed for the ultimate unit holder. A termination clause and the ability to resell on default did not alter the character of the arrangement so long as the agreement was entered into before construction was complete. The provisions concerning ownership under the transfer of property law and the ownership-flats legislation did not displace the tax characterization under the sales tax statute.

Conclusion: The arrangement amounted to a works contract, and turnover tax was leviable on the transfer of property in goods involved in the construction.

Final Conclusion: The developer's activity fell within the taxing provision governing works contracts, and the challenge to the tax liability failed.

Ratio Decidendi: Under an inclusive statutory definition, an agreement entered into before completion for construction of flats or buildings for consideration is a works contract even if the developer claims an ownership or development interest and retains contractual rights on purchaser default.

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