CIT vs. Vishal Developers (Gujarat High Court)

DATE: October 7, 2014 (Date of pronouncement)
DATE: November 24, 2014 (Date of publication)
AY: 2007-08
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S. 80-!B(10): Law laid down in Radhe Developers 341 ITR 483 (Guj) on "works contract" is not affected by the law laid down by the Supreme Court in Larsen and Toubro Limited (2014) 1 SCC 708 and K. Raheja Development Corporation (2005) 141 STC 298

The department argued that the judgement in Commissioner of Income-tax v. Radhe Developers, (2012) 341 ITR 483 (Guj.) which draws a distinction between a “development contract” and a “works contract” and which holds that the benefit of s. 80-IB(10) is allowable to an assessee even if he is not the owner of the land is not good law in view of the judgements of the Supreme Court in Larsen and Toubro Limited v. State of Karnataka, (2014) 1 SCC 708 and K. Raheja Development Corporation v. State of Karnataka, (2005) 141 STC 298 where the concept of a “works contract” has been explained. HELD by the High Court dismissing the department’s appeal:

The interpretation of the expression “works contract” in K. Raheja Development Corporation v. State of Karnataka was rendered in the background of the term “works contract” defined in Section 2(1)(v-i) of the Karnataka Sales Tax Act and it was in that backdrop that the Supreme Court concluded that the agreement was one of works contract. The interpretation rendered by the apex court in the said decision was based not on the normal meaning of the term “works contract” but on the special meaning assigned to it under the Act itself, which provided for a definition of inclusive nature. Even the decision in the case of Larsen and Toubro Limited (supra) was rendered in the context of Sales Tax/VAT of the said State. The Supreme Court while upholding the ratio of the decision in the case of Raheja Development Corporation (supra) further laid down certain principles for judging when a contract for construction can be stated to be a works contract and in the process when the materials used in the execution of such contracts can be exigible to Sales Tax/VAT. There is no reason to deviate from the case of Radhe Developers and the assessees were entitled to the benefit under section 80IB of the Act even where the title of the lands had not passed on the assessees and under some cases the development permissions also have been obtained in the name of the original owners (Commissioner of Income Tax III v. Swastik Associates And Commissioner of Income Tax-I v. Archan Enterprises followed)

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