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The High Court has declared the imposition of 15% value-added tax (VAT) on immovable property sold through judicial auctions conducted by Artha Rin Adalats (money loan courts) to be unlawful and beyond legal authority.
A High Court bench comprising Justice Sardar Rashid Jahangir and Justice Ziaul Haque delivered the judgment on Sept 1. Barrister Sakib Mahbub, a lawyer for the auction buyers, confirmed the matter to the media on Thursday.
According to the case documents, a bank filed a case with an Artha Rin Adalat after a company failed to repay its working capital loan. The mortgaged property was subsequently put up for auction under Section 33(1) of the Artha Rin Adalat Ain, 2003.
The petitioners purchased the property for Tk 24 crore, offering the highest bid at the auction, and deposited the required amount. The court subsequently directed them to pay 15% VAT on the auction price along with the applicable stamp duty.
The auction buyers and the decree-holder bank challenged the order. Although the bank was later exempted from paying VAT in light of earlier court judgments, the order requiring the auction buyers to pay VAT and stamp duty remained in force.
The auction buyers then filed a writ petition with the High Court. On April 8, the court issued a rule challenging the legality of the VAT demand and stayed the operation of the Artha Rin Adalat’s order until disposal of the rule.
After the final hearing, the High Court disposed of the rule and supplementary rule and held that directing the collection of 15% VAT at source from auction buyers on the auction price was beyond lawful authority and had no legal effect.
The court also declared unlawful the relevant portion of an SRO that included buyers of immovable property in the category of “auction buyers of goods”.
The ruling means buyers purchasing immovable property through judicial auctions conducted by Artha Rin Adalats will not have to pay the disputed 15% VAT.
The court further observed that if Parliament exempts the sale or transfer of any property from VAT through legislation, a subordinate law or SRO cannot subsequently impose the tax on that property.
Senior lawyers Barrister A.M. Mahbub Uddin Khokon, Barrister Mustafizur Rahman Khan, Barrister Sakib Mahbub and Advocate Sajid Hasan appeared for the auction buyers. Deputy Attorney General Barrister Tanim Khan represented the National Board of Revenue (NBR).
Lawyers said the judgment would serve as an important precedent for judicial auctions conducted by Artha Rin Adalats and the purchase of immovable property through such proceedings.