L&T moves SC over turnover tax levy on projects

Construction major Larsen & Toubro has moved the Supreme Court, challenging the levy of turnover tax on transfer of property jointly developed by a developer and the owner of the land.

A bench headed by Justice S H Kapadia sought response from the Karnataka government on L&T's plea challenging the state government's authority to levy turnover tax on property developed and sold as apartments under the state law.

The Karnataka High Court had dismissed the company's petition which challenged the demand notice issued by the sales tax authorities asking to pay around Rs 4.5 crore turnover tax on a project between 2000-2005.

L&T had entered into a development contract with one Dinesh Ranka for construction of a multi-storied apartment complex 'South City' in Hobli. While the owner was to contribute the land, the company was to construct the complex with its own material and men.

It was also agreed that 25% of the total space was to belong to the owner and 75% to the developers and there was no monetary consideration for construction.

According to L&T, the High Court had failed to appreciate that the judgement delivered by the apex court in the matter of K Raheja Development Corporation vs State of Karnataka required reconsideration by a larger bench as it adversely affected the entire construction industry in the country.