TaxTMI 
TaxTMI 
2026 (8) TMI 322
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....re of Writ of Mandamus, declaring the Assessment Order of 2nd Respondent in CCT's Enft.AC.III/Casc No.31/2007-08 dt.01-12-2007 as illegal arbitrary and set aside the same or in the alternative declare Section 4(7)(d) to the extent it authorizes the levy of VAT on amounts received prior to execution of sale deed as ultra vires Entry 54 of List II of the 7th Schedule to the Constitution of India and strike down the same and pass such other order or orders as this Hon'ble High Court deem fit and proper in the circumstances of the case." 3. The facts of the case are that the petitioner is a real estate developer engaged in the construction and sale of residential apartments. Prior to the enactment of the Andhra Pradesh Value Added Tax, 2005 (for short the 'APVAT Act'), the petitioner sought clarification from the Authority for Clarification and Advance Ruling regarding the applicability of VAT on its business transactions, particularly concerning the timing of tax liability on property sales. On 30.07.2006, the Advance Ruling Authority issued its order vide C.C.Ts. Ref. No. PMT/P & L/A.R.COM/80/2006 clarifying that in cases where property is initially registered only....
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....misinterpreted and misapplied the provisions of Section 4(7)(d) of the APVAT Act, and Rule 17(4) of the Rules framed thereunder, leading to an erroneous and excessive tax demand. 7. The learned counsel for the petitioner further submits that as per Section 4(7)(d) of the APVAT Act read with Rule 17(4) a dealer has the option to pay tax on a composition basis at the rate of 4% or 5% on 25% of the total consideration received or receivable for the transfer of property in goods involved in the execution of works contract. Moreover, the petitioner had duly exercised this option before commencement of the construction and has been regularly paying tax in accordance with the prescribed provisions. The liability to pay tax arises in the month in which the sale of property is concluded and registered, and the tax should be computed on the consideration stipulated in the initial agreement between the developer and the prospective buyer. 8. The learned counsel for the petitioner further contended that the respondent No. 2 had misinterpreted the expression "received or receivable" in Section 4(7)(d) of the APVAT Act as, all amounts received at any stage of the transaction, including adv....
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....udgment in Omega Shelters (P) Limited (supra), the learned counsel for the petitioner prays that this Hon'ble Court may be pleased to allow this Writ Petition and declare the impugned assessment order dated 01.12.2007, passed by respondent No. 2 as illegal, arbitrary, and bad in law. 12. Per contra, the learned Assistant Government Pleader primarily contended that the petitioner was liable to pay tax on all amounts received from customers during the assessment period September, 2005 to September, 2007, irrespective of whether the sale deeds were registered or not. The learned Assistant Government Pleader's contention is that the nature of the composition scheme under Section 4(7)(d) of the APVAT Act mandates tax payment on amounts "received or receivable" and the dealer had entered into agreements for Sale and Agreements for Construction with customers, wherein payments were structured in installments linked to various stages of construction such as foundation aying, pillar work, lintel work, roof completion, and plastering. These agreements explicitly mentioned that payments would be made in installments and that interest would accrue in case of delays, indicating that ....
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....authorities of the Commercial Tax Department, The respondent No. 2 being a subordinate authority had no jurisdiction to deviate from or override this binding ruling. The respondent No. 2 therefore has completely disregarded this binding precedence. The petitioner had legitimately relied upon this Advance Ruling in structuring its tax compliance and the subsequent assessment seeking to tax advance payments constitutes a clear violation of the principle of legitimate expectation and legal certainty. Furthermore, the interpretation adopted by the respondent No. 2 regarding the expression "received or receivable" under Section 4(7)(d) of the APVAT Act is fundamentally flawed and contrary to settled legal principles. 17. It would be trite at this juncture to refer to the erstwhile Andhra High Court's judgment in Omega Shelters (P) Limited (supra), wherein in paragraph Nos.46, 54, 61, and 63, it has been held as under: "46. The liability of the dealer, to pay tax by way of composition under section 4(7)(d) of the Act, is on the total consideration received, towards the composite value of the land and building, from the commencement of construction of the residential apart....
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....nabove, is at four per cent./five per cent. of 25 per cent. of the consideration received or receivable. As tax is required to be paid even on the consideration not yet received, it is evident that the liability to pay tax, on composition under section 4(7)(d), is also on the consideration receivable on the construction to be continued and completed, in terms of the initial agreement, after conclusion and registration of the sale of the semi-finished structure. 63. Even if the dealer has not received the entire consideration, and a part thereof is still due, he is nonetheless required to pay tax on the total consideration, (in terms of the initial agreement between the developer and the prospective buyer), at the time of registration of the sale of the semi-finished structure. The taxable turnover, under section 4(7)(d), is the entire consideration, agreed upon between the developer and the prospective buyer in the initial agreement, for the value of the land and the completely constructed building. The tax, so computed, must be paid to the Sub-Registrar at the time of registration of the conveyance deed for the sale of the semi-finished structure. The VAT payable, at the ....