Mantri Castles Private Ltd. vs The Assistant Commissioner of Commercial Taxes and Others

B.V. Nagarathna, J.

Petitioner is a company engaged in development of real estate. Petitioner has assailed re-assessment orders dated 27.2.2015 passed by the first respondent in respect of the assessment years 2010-11 (Annexure-D), 2011-12(Annexure-E) and also demand notices dated 27.2.2015, for the periods 2010-11, 2011-12 respectively (Annexure-F and G). Petitioner has also assailed Circular No. 12/2009-10 dated 7.12.2009 issued by the second respondent/Commissioner of Commercial Taxes, Bangalore (Annexure-H) and has sought other incidental reliefs.

Briefly stated, the facts are that petitioner entered into a Joint Development Agreement with Gokulam Shelters Private Limited, Iskcon Charities and India Heritage Trust on 29.9.2010. Under the said agreement, petitioner agreed to construct residential apartments on the land owned by Gokulam Shelters Private Limited and share the proceeds for the sale of the units with Gokulam Shelters Private Limited, ISKCON Charities and India Heritage Trust in the specified ratio incorporated in the Joint Development Agreement. Petitioner has constructed the apartments and the apartments have been sold by the petitioner on the strength of the General Power of Attorney which have been executed in favour of the petitioner. Under the Karnataka Value Added Tax Act, 2003 (hereinafter referred to as ''Act'' for the sake of brevity), tax on the entire sale proceeds had been paid by the petitioner but it claimed deduction on the value of the undivided interest (immovable property) in the project. The assessing authority however did not accept the claim of the petitioner with regard to the deduction sought in respect of the undivided interest in the project and added the said amount and held that tax was leviable even on the land cost. Being aggrieved by the assessment orders passed by the first respondent, petitioner has filed these writ petitions while at the same time assailing Circular No. 12/2009-10 dated 7.12.2009. According to the petitioner, the need to assail the said Circular has arisen on account of the fact that the assessing authority has applied the said Circular to the petitioner''s case, whereas according to the petitioner, the said Circular is not applicable.

I have heard learned senior counsel for the petitioner and the learned Government Pleader who appears for the respondents on advance notice and perused the material on record.

During the course of submission, learned senior counsel appearing for the petitioner drew my attention to various clauses of the Joint Development Agreement dated 29.9.2010 and also the assessment orders impugned herein, and pointed out that the assessing authority while recognising the fact that no portion of the built up area was allotted to the owners of the land has nevertheless applied Circular dated No. 12/2009-10 dated 7.12.2009 to the petitioner which is erroneous. He contended that the undivided interest in the project has been sold along with the constructed portion of the apartments to the intending purchasers and even in respect of the undivided interest in the land, the owners of the land have not been allotted any portion. Instead the owners of the land have only a share in the sale proceeds of the apartments sold by the petitioner to various purchasers. He therefore contended that the assessing authority could not have applied the Circular No. 12/2009-10 to the petitioner''s case, having regard to the peculiar facts of the case on hand. In the circumstances, the learned senior counsel contended that the assessment orders would have to be quashed and the matter would have to be redone at the hands of the assessing authority.

Per contra, learned Government Pleader, who appears on advance notice at the outset contended that the questions raised in these writ petitions are such that would have to be considered by the First Appellate Authority rather than in a writ petition. Merely because the Circular has been assailed in these writ petitions that would not imply that this Court would have to entertain writ petitions under Articles 226 and 227 of the Constitution of India. He contended that in case petitioners are aggrieved by the assessment orders, they have an alternative and efficacious remedy under Section 62 of the Act and therefore the petitioner must be relegated to the appellate authority. He contends that having regard to the facts of the present case, the applicability of the Circular would have to be considered by the appellate authority and that a finding on facts would have to be given before considering the question as to whether the Circular is applicable or not, as according to the petitioner, Circular is not applicable in the case of the petitioner. He contends that these are all matters that would have to be considered by the First Appellate Authority. In the circumstances, learned Government Pleader contended that petitioner may be permitted to avail the alternative remedy.

I have considered these submissions in the light of the material on record. At the outset, it is no doubt true that as against re-assessment orders, there is an alternative and efficacious remedy of appeal available under Section 62 of the Act. However, learned senior counsel for the petitioner has strenuously argued that petitioner herein cannot be relegated to the appellate authority, having regard to the validity and applicability of Circular No. 12/2009-10 dated 7.12.2009 being in issue. In that regard, it is also contended that the Circular itself was not in accordance with law.

Having heard the learned counsel for parties, I am of the view that the applicability or non-applicability of the Circular would depend squarely on the facts of the present case and particularly, the finding to be given on the said facts.

However, the learned Government Pleader contended that the Circular was squarely applicable to the petitioner''s case.

In response, it was contended by the learned senior counsel for the petitioner that before giving a finding as to the applicability of the Circular in the instant case, what requires to be determined is the nature of transaction that has been entered into by the petitioner vis-�-vis the owner of the land on the one hand and the purchaser of the apartment on the other. Once that is determined and a finding is given as to on what aspect tax is leviable, the applicability or non-applicability of the Circular would have to be considered. Learned senior counsel contended that the assessing authority has rightly given a conclusion on the factual aspects, but has erred on the applicability of the Circular in the present case. Therefore, I am of the considered view that the finding to be recorded, having regard to the issues which have been raised in the present dispute and the nature of findings that would have to be given and also applicability of the Circular dated 7.12.2009, petitioner would have to be relegated to the First Appellate Authority for the purpose of seeking adjudication on these aspects of the matter.

At this stage, it is brought to my notice by the learned senior counsel that petitioner has already paid a sum of Rs. 5.00 crores pursuant to an interim order passed by this Court, as the deduction was declined based solely on the Circular No. 12/2009-10 dated 7.12.2009 and the controversy in the present case is on the applicability of the said Circular.

In the circumstances, while the writ petitions are dismissed as not maintainable on account of availability of alternative remedy, liberty is reserved to the petitioner to avail the alternative remedy, if so advised. However, respondents are directed not to make any fresh demand pending disposal of the appeal/appeals, if any, to be filed by the petitioner. Appeals could be preferred by the petitioner within a period of two weeks from the date of receipt of certified copy of this order. If the said appeal/appeals is/are filed, the appellate authority shall not raise any objection regarding delay if any, in filing the appeal/appeals. The First Appellate Authority to consider the issues raised on the aspect of the applicability of the Circular dated 7.12.2009, with an open mind and having regard to the facts of the present case decide the appeal/appeals within a period of two months from the date of filing of the appeal/appeals.

Though the writ petitions are not entertained on merits solely on account of the alternative remedy, they are disposed with the aforesaid directions.

All contentions of both sides are left open.