LARSEN & TOUBRO LIMITED Vs. ADDITIONAL DEPUTY COMMISSIONER OF COMMERCIAL TAXES & ANR.
SUPREME COURT OF INDIA
LARSEN AND TOUBRO LIMITED
Additional Deputy Commissioner Of Commercial Taxes And Anr.
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(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
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