LARSEN & TOUBRO LIMITED Vs. ADDITIONAL DEPUTY COMMISSIONER OF COMMERCIAL TAXES & ANR.
LAWS(SC)-2016-9-5
SUPREME COURT OF INDIA
Decided on September 05,2016

LARSEN AND TOUBRO LIMITED Appellant
VERSUS
Additional Deputy Commissioner Of Commercial Taxes And Anr. Respondents

JUDGEMENT

A.K.SIKRI,J. - (1.) Same parties are entangled in these three appeals which arise out of the provisions of the Karnataka Sales Tax Act, 1957 (hereinafter referred to as the 'Karnataka Act'). Two appeals are preferred by the assessee, viz. Larsen & Toubro Ltd., and one appeal is filed by the Revenue, i.e. the Sales Tax Department of Karnataka.
(2.) The assessee is doing the business of engineers and contractors and in this process it, inter alia, executes projects under contracts with public sector undertakings, local bodies as well as the Union and the State Governments, besides private sector. The assessee is registered under the Karnataka Act and files its returns for payment of sales tax thereunder. The contracts which are secured by the assessee are the works contracts and a part thereof is generally assigned to sub -contractors. For example, in Civil Appeal No. 2956 of 2007, the assessee had secured a contract to construct an indoor stadium styled 'Sree Kanteerava Indoor Stadium' in Bengaluru and the assessee assigned the work of finding their own materials and laying foam concrete to M/s. Lloyd Insulation (India Limited). This sub -contractor was registered with the Deputy Commissioner of Commercial Taxes, Assessment -IX City Division, Bengaluru, and accordingly it had submitted returns and paid taxes for the execution of the works contract and was duly assessed under Sections 5 -B and 6 -B of the Karnataka Act. A certificate dated April 10, 1998 to that effect had been marked before the authorities. Likewise, returns are filed by the assessee as well on regular basis. In the course of the assessment, the assessee submitted that the sub -contractors were the parties who executed the works contract and since the transfer of property involved in such execution had already been taxed, the appellant cannot be taxed again under Section 6 -B of the Karnataka Act there being only one taxable event for the purpose of Article 366(29A)(b) of the Constitution of India. In nutshell, it was the submission of the assessee that value of the work entrusted to the sub -contractor could not be taken into account while computing total turnover of the assessee for the purpose of taxation under the Karnataka Act. This submission of the assessee was, however, negatived by the Assessing Officer as well as the Karnataka Appellate Tribunal. In the revision filed under Section 23 of the Karnataka Act, the appellant raised the following questions: (i) Is the assessee liable to turnover tax under Section 6 -B of the Karnataka Sales Tax Act, 1957 on the payment made to the sub -contractor in spite of the fact that the sub -contractor had declared the turnover and paid taxes? (ii) Since the payment made to the sub -contractor does not amount to turnover within Section 2(i)(v) of the Karnataka Sales Tax Act, 1957, can such payment be part of total turnover as per Section 2(1)(u -2) of the Karnataka Sales Tax Act, 1957? The High Court decided the aforesaid questions against the assessee and thereby affirmed the view taken by the Appellate Tribunal which resulted in dismissing the revision petition of the assessee vide judgment dated February 03, 2006. This judgment is the subject matter of challenge in Civil Appeal No. 2956 of 2007, which pertains to the Assessment Year 1997 -1998.
(3.) Likewise, for the Assessment Year 2002 -2003 (Civil Appeal No. 2318 of 2013), the assessee has been meted out the same treatment whereby the work awarded to the sub -contractors, who are the registered dealers and have paid sales tax in respect of the works undertaken by them, has been added in the total turnover of the assessee for the purposes of levying tax. However, here the matter is remanded to the Assessing Officer for ascertaining the liability of the assessee under Section 5 -B as well as Section 6 -B of the Karnataka Act in respect of total turnover of the assessee.;


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