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Flat owners in country's tallest towers take on builder over VAT
May, 20th 2013

Trouble is brewing at The Imperial, India's tallest twin 60-storey residential towers at MP Mill compound in Tardeo. For the past few months, residents have been embroiled in a legal dispute with the developer, S D Corporation (SDC), over the latter's demand for value-added tax (VAT).

Some of the residents claim the developer has not given them parking slots because of the dispute. Recently, two of the residents sent a legal notice to SDC, stating they are not liable to pay the VAT -an average Rs 40 lakh per flat -as it was not part of their sale agreement and they were not informed about it when the flats were sold in 2007.

SDC, a joint venture between construction firm Shapoorji Pallonji and builder Dilip Thakker, refuted the allegations. "No flat buyer has been denied possession of parking slot or flat," SDC director Amit Thacker said.

The Imperial is home to influential individuals like Axis Bank CEO Shikha Sharma, HDFC chairman Deepak Parekh's son, senior lawyer Satish Maneshinde and senior management executives of US private equity fund Blackstone. There are 116 flats in the two luxury towers; each flat costs an average of Rs 25 crore.

In a notice sent on behalf of a resident, lawyer Javed Gaya stated that SDC should have informed his client of the liability considering they were party to a writ petition filed in September 2007 against VAT. "This liability could have been factored into the purchase price. There was no provision for VAT in the letter of option (LoO) which deals with all liabilities, including service tax, to be paid by us. As it has been agreed that the conditions in LoA will supersede those in the contract agreement in case of a conflict, SDC's action of surreptitiously inserting this liability in the sale agreement is unacceptable to us," the notice stated.

The issue dates back to early 2012 when SDC started giving possession of flats. As the possession was delayed by two years, some residents demanded that SDC pay them interest at the rate of 11% interest per annum for the period as per the agreement. Even as the quantum of penalty was being debated, the SDC issued a demand notice for VAT.

Residents claim that when they voiced their objections, the SDC, through the security guards employed by it, restricted their entry and that of labourers employed by them to renovate their flats. The developer allegedly refused to give possession of flats and car parking slots till VAT was paid.

"Eleven of my son's friends -all senior financial executives -purchased flats here because of him. Though VAT has been paid for my two flats, the developer is not giving me parking slots because my son has refused to pay VAT for his flat. Such behavior is very unbecoming of SDC," said a resident, whose son is a senior executive with Blackstone and has a VAT liability of Rs 40 lakh.

Two of the residents, including one whose VAT liability is Rs 70 lakh-filed a complaint with the Tardeo police after their imported cars-a Mercedes and a BMW -were damaged. The cars were allegedly damaged in the parking garage which has CCTV cameras.

The SDC's director said a section of residents was using arm-twisting tactics to get their VAT liabilities waived. "Even after the Bombay high court upheld the levy, some purchasers have refused to reimburse the VAT amount we had paid on their behalf," said Thacker. "They have breached the terms of the agreement. We are contemplating legal action for recovery of the VAT amount from these flat buyers."

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