JUDGMENT [ENTITY], J.
1. Application for review of the judgment in [CASE NUMBER] dated September 24, 1999 has been moved alleging certain factual and legal mistakes.
2. Argument of both the learned counsel for the parties on the application filed for review as well as merit heard.
3. The present dispute is in respect of reassessment for the year 1987-88 and assessment from 1988-89 to 1990-91. The assessments framed were set aside by the appellate authority in which the clarifications of the Commissioner dated April 28, 1989 and September 15, 1993 were also taken into consideration. The revising authority found that there was no composite sale of land and the building thereon and that the agreement by the appellant with the persons who have agreed to take shops, godowns, garages, etc., proposed to be constructed were in the nature of works contract. For building contract it was considered that it is not necessary that the contractee should have absolute ownership of the land. It is enough if he has some limited interest in the land. The persons who had entered into agreement with the appellant to take the flats, etc., before construction had by virtue of that agreement acquired right interest in the plot of land to the extent of the undivided share in the land relatable to the flats agreed to be taken by them. This observation of the Additional Commissioner was after examining the nature of the contract entered into by the appellant with the prospective purchaser of the building and making the provisions of [ACT] applicable.
4. In the judgment dated September 24, 1999 See page 3 supra following findings were recorded in respect of liability of tax under [SECTION] of the [ACT] :
(a) If the building was first constructed and thereafter agreed to be sold then it was a case of transfer of immovable property on which no tax is attracted.
(b) According to the agreement entered into by the appellant with the allottees of flat or other building, advance is taken at the time of execution of contract and thereafter in 15 instalments the balance amount is paid.
(c) It has not been established that at the time when the agreement was entered into, even construction of the building was started by the appellant.
(d) The ultimate purchaser has to purchase the land of his share from the owner and not from the appellant.
(e) It had also not come on record that after entering into agreement only plans were got approved and immediately thereafter agreements were entered into with the prospective buyer. Provisions of [ACT] were held applicable and it was observed that prospective buyers have right of inspection during construction under Clause (x) of the agreement.
(f) The developer is deemed to be owner only when the building constructed is not taken or acquired by any person at the time the building is ready for occupation.
5. Ultimately it was held that there is transfer of property in goods involved in the execution of the contract. The appellant were considered as a contractor for construction of the flats for the ultimate buyer.
6. So far as the finding in paras (a) and (f) are concerned it is not in dispute as even the Additional Commissioner while exercising the power of revision under [SECTION] has observed that if any flats, shops, offices, godowns, garages, etc., had remained with appellant and not taken by other persons before completion of the construction of the building and have been subsequently sold by the dealer it amounts to sale of immovable property by the dealer as owner and not liable to sales tax under works contract.
7. The observation made in para (d) above is not in dispute as the ultimate purchaser has purchased the land of his share from owner and not from the appellant. Reliance is placed on the judgment given in the case of [PRECEDENT] wherein it was held that the owner for the purpose of [SECTION] of the [ACT] is the person who has received or is entitled to receive the income from the property in his own rights and the requirement of registration of the sale deed in the context of [SECTION] is not warranted. Similar view was taken in the case of [PRECEDENT] , wherein it was observed that the term owner as occurring in [SECTION] of the [ACT] must be assigned a wider meaning. Any one in possession of property in his own title exercising such dominion over the property as would enable others being excluded therefrom and having right to use and occupy the property and/or to enjoy its usufruct in his own right would be the owner of the building though a formal deed of title may not have been executed and registered as contemplated by the [ACT], the [ACT], etc. "Building owned by the assessee", the expression as occurring in [SECTION] of the [ACT], means the person who having acquired possession over the building in his own right uses the same for the purposes of the business or profession though a legal title has not been conveyed to him consistently with the requirements of law such as the [ACT] and the [ACT], etc., but nevertheless is entitled to hold the property to the exclusion of all others.
8. On the basis of the judgments referred to above it is submitted that the appellant was the owner of the land as he has already entered into agreement for purchase of the land and has taken possession and even paid the consideration therefor. It was under the agreement of sale that the land lady has permitted to have the construction over the land having her no interest in the constructed property. In the light of the above judgment the appellant should have been considered as owner of the land. It is submitted that the judgment given in [PRECEDENT], referred in the judgment dated September 24, 1999 in the context of [SECTION] of the [ACT] has been overruled in the case of Podar Cement Pvt. Ltd. referred to above. Decision given in the case of [PRECEDENT] , have impliedly been overruled in the case of Mysore Minerals Limited .
9. The judgment of Podar Cement Pvt. Ltd. and Mysore Minerals Ltd. , has considered the aspect of ownership in the context of [SECTION] of the [ACT]. It is true that for the purpose of chargeability of tax, registration is not necessary in view of the judgment of the apex Court as the person who has received the income or is entitled to receive the income is considered to be owner. For the purpose of liability of tax, the registration of property in his name is not necessary. In the case of the assessee, these judgment will not help because ultimately the registration was got effected by the ultimate purchaser from the land owner.
10. So far as the finding in para (b) is concerned, it may be stated that according to the agreement entered into by the appellant with the allottee of the land or building, advance is taken at the time of execution of agreement. Thereafter, 15 instalments and balance amount is paid at the time of giving possession of the flat which is not disputed. A controversy has been raised as to when the agreement is entered into by the appellant. This is dealt with in para (c) above and discussed below.
11. In para (c) it was observed that it has not been established that at the time when the agreement was entered into, even the construction of the building was started by the appellant, It is submitted that the construction of the building commenced in 1988 and commencement certificate was obtained on April 6, 1988 and that the purchase of the building by the ultimate purchaser was subsequent to such commencement. Copy of the commencement certificate annexure B is submitted and area of about 2,36,000 sft. was constructed and it is stated that agreement to sell before April 6, 1988 were for 47,775 sft. The investment was made by the appellant from his own funds. It is submitted that other builders are entering into two agreements one for sale of undivided interest in land and another to construct the flat for and on behalf of the purchaser and after the building is completed a sale deed is executed only in respect of undivided interest in the land and no sale deed is executed in respect of flat/building. In the case of the appellant the agreement is for the sale of undivided interest in the land as well as for sale of flat/building and registered sale deed have been executed for which full stamp duty is paid. The sanction plan of the premises were in the name of the owner of the land and not in the name of the purchaser and there was no prospective purchaser at the time when the property was agreed to be purchased by the appellant to develop. It is submitted that the construction of the building commenced even prior to the agreement entered into with the purchasers. Wings E and F had been completed by January 9, 1986. All steps for construction were taken as owner of the property. The appellants were not the contractors for the said purchasers. The development agreement was entered in the year 1981.
12. The entire judgment has proceeded on the basis that at the time of entering into contract with the prospective buyer, even construction of the building was not started by the appellant. From the facts which have now come on record it is established that it was only in respect of part of the agreement which was entered into before construction was started. A finding in this regard was also recorded in para (e) above.
13. It was observed that it had come on record after entering into agreement only the plans were got approved and immediately thereafter agreements were entered into with the prospective buyer. The agreement entered was with the land owner and thereafter the plans were got approved and the agreement with the prospective buyer could be only thereafter. In the judgment in respect of the agreement entered into before starting of the construction of the flats were considered to be liable to tax. Even the revising authority has also referred to those agreements which were entered into before the building construction was started.
14. In the judgment dated September 24, 1999 it was observed that it has not been established that at the time when the agreement was entered into even the construction of the building was started by the appellant. This observation makes it clear that if the construction of the building has been started by a developer before the agreement then the construction of such building would not attract the provisions of [SECTION] of the [ACT]. In the document which has been produced it has been shown that the construction of the building commenced as per commencement certificate dated April 6, 1988. According to the appellant, the agreements before April, 1988 were entered for 47,715 sft. This is a factual matter. If the assessing authority finds that the agreement prior to April 6, 1988 were only for 47,715 sft. then for rest of the construction tax under [SECTION] was neither held leviable nor could be levied. In this regard it may be observed that the revising authority in his order dated February 27, 1998 observed that before construction of the residential flats, shops, offices, etc., on the said plot Mittal Investment Corporation entered into several agreements with prospective buyers to sell the flats, shops, etc., with undivided interest in the land at which they were proposed to be built for an agreed price on ownership basis. After building, the sale deeds have been executed in favour of the buyers of flats, shops, offices, etc., jointly by Venkateshwara Enterprises and Mittal Investment Corporation respectively as vendors of the land confirming party respectively. This also shows that the Additional Commissioner has taken into consideration only such agreement which were entered into before the construction of the building. Even in the judgment given by us the tax under [SECTION] was held attracted as it was found that when the agreement was entered into construction of the building was not started. In other words, in respect of the agreement which have been entered into after the construction of the building started liability of tax under [SECTION] cannot be invoked. The figure of 47,715 sft. is however subject to verification by the assessing authority.
15. In the judgment dated September 24, 1999 it was observed that after entering into agreement by the appellant with the owner only plans were got approved and thereafter agreement were got entered with the prospective buyer. It was further observed that construction was done in accordance with the provisions of the Act of 1972. The provisions of the Act are applicable only to the flats and not to other commercial buildings. The land was owned by Smt. [ENTITY]. Mr. [ENTITY] entered into partnership with the land lady on May 24, 1981. The valuation of the land was taken at Rs. 85,00,000 which was contributed as capital (stock in trade). Mr. [ENTITY] agreed to contribute Rs. 5 lakhs towards capital. The land was agreed to be transferred for a consideration of Rs. 90,00,000. The firm authorised the appellant to construct flats at their own costs and expenses for sale to the prospective buyers.
As observed above, the provisions of [ACT] are not applicable to the commercial building and in respect of the residential flats for which the agreements are entered into before starting the construction of the building, it is submitted that the consideration for the transfer of land was already paid under the agreement and thus the appellant could be considered to be the owner even without execution of the registered sale deed. It is submitted that in the letter dated May 24, 1989 the Commissioner has clarified that the sale of apartments/office/shops constructed by the assessee on the land owned by it is not liable to tax under the provisions of the [ACT] as it amounts to sale of immovable property on which sales tax is not leviable. It is submitted that the circular issued by the Commissioner is binding as has been held in series of decision of the apex Court and the latest being the decision given in the case of [PRECEDENT] wherein it was held that the circulars are binding on the authorities under [SECTION] of the [ACT]. It is submitted that similar provision exists under [SECTION] of the [ACT].
16. A copy of the agreement dated October 12, 1987, have been placed on record which has been entered into with Saltlake Shirts Pvt. Ltd. It is mentioned that the land was originally owned by Mrs. [ENTITY], who has subsequently entered into partnership with Mr. [ENTITY] w.e.f. April 25, 1981 for development of the property. Development agreement is dated April 27, 1981 between Venkateswara Enterprises on the one part and the appellant on the other, which authorises the appellant to develop the said property and construct the building thereon and to sell and dispose of flats, office premises, tenements, garages and godowns and other premises in the building to be constructed by the developers on the said property on ownership basis or otherwise. The appellant has moved the Bangalore Municipal Corporation and other concerned authorities to permit them or their allottees to use the top 5th and 7th floors of the residential building for office or other commercial purposes.
17. The agreement has stipulated that the developer are desirous of selling and disposing of offices, shops, godowns, garages on ownership basis and thus the agreement for sale was entered into.
18. Under the agreement the variations and modifications in the building could be as per the requirement of the Corporation of the City of Bangalore or any other local authority. The said agreement makes it clear that the possession has to be given after the agreed full payment is made by the prospective buyer. The developer has the right to raise further stories or additional structures as may be permitted by the Municipal Corporation other competent authority. Under Clause 9, advance payment is liable to be forfeited if the entire amount is not paid. The conditions of the agreement make it clear that the agreement is for selling of the constructed building, i.e., shop, etc., and not an agreement to construct the building on behalf of the prospective buyer. Though once the allotment under the agreement is made and payment is received as advance in part, the allottee has enforce-able right for specific performance and the appellant cannot sell that said part of the building to any other person except when there is breach of the contract and forfeiture of the amount by the appellant for non-payment of the balance amount by the prospective buyer. The prospective buyer has been described in the agreement at different places as purchaser. So far as the land is concerned, on the facts of this case it has to be construed that the firm Venkateswara Enterprises was the owner of the land and they had no further interest in the construction in respect of the building which has been constructed thereon. The right, title or interest in building is not transferred to the prospective buyer but is agreed to be transferred by the appellant as seller and not as a contractor to work for them. The other contract which has been placed on record makes the distinction between the agreement entered into by the buyer where only land is transferred and there is no registration of the building by the developer in favour of such prospective buyer of the building in that case he has acted only as a contractor who has constructed the building on behalf of such purchaser of part of the land. In such case no stamp duty has been paid for transfer of the building as it was considered that the building does not belong to the developer but belongs to the, prospective buyer. There could be separate owner of land and building. The building which has been constructed by the appellant is in his own right and unless it is established from the agreement which have been entered into before starting the construction that the appellant has to undertake the construction as a contractor and not as the owner of the building, no tax could be levied.
19. From the above, it is clear that the entire building was not constructed after entering into agreement. According to the appellant he has entered into agreement for 47,715 sft. before construction was started. In order to make the provisions of [ACT], apply, it has to be seen as to whether the said agreements were in respect of residential flats or for commercial property. The provisions of the [ACT] are not applicable to commercial property. This matter has to be examined by the assessing authority at his level.
20. In respect of the residential building it has to be examined as to what extent the agreements were entered into before the construction commenced. The judgment dated September 24, 1999 has proceeded on the basis that the construction has started only after agreements were entered into. On this basic point there is a mistake apparent which is liable to be rectified and for that purpose the assessing authority is directed to verify as to what extent the agreements for construction of the flats were entered into before construction of the building started.
21. For the flats for which the agreements have been entered into before starting construction of the building, it has further to be verified as to whether the appellant has the right to forfeiture of any advance paid, A contractor cannot have the right to forfeit the advance paid. It is only the owner of the building who can forfeit the advance. The contractor has a right only for the unpaid amount. According to the appellant they have neither departed with the possession nor have parted with the ownership of the building until the registered sale deeds were executed.
22. In view of the above discussion we are of the view that the order passed on September 24, 1999 requires modification and the same is modified with the following directions :
1. The appellant would not be liable for payment of tax under [SECTION] in respect of the building which has been constructed before entering into any agreement and sold thereafter.
2. The appellant would not be liable for payment of tax under [SECTION] of the Act in respect of the agreement which have been entered into after the construction of the building started.
23. In case the said agreement have conferred the right to forfeiture of the advance then the appellant could not have been considered to be the contractor and it is only in those cases where the right is only to recover the balance amount of the construction cost, the liability of the appellant to pay tax would be there.
24. Review application is allowed with the above observations and the matter is remanded to the assessing authority to examine in the light of the observations made above.