Strict construction of works contract deductions bars notional depreciation on contractor-owned machinery and new claims in second appeal.

A new depreciation claim for machinery could not be raised for the first time before the Tribunal in second appeal because it required fresh factual enquiry and was not merely a question of law on existing findings. In computing taxable turnover under section 5C(1)(c)(ii) of the Kerala General Sales Tax Act, depreciation on contractor-owned machinery and tools was not deductible, as the provision covers only actual charges incurred for obtaining machinery or tools on hire or otherwise. The deduction clause was held to require strict construction, and the Tribunal's order was set aside while the assessment confirmed in first appeal was restored.

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Issues: (i) whether a new claim for deduction of depreciation on machinery could be raised for the first time before the Tribunal in second appeal; (ii) whether depreciation on machinery and tools is deductible while computing taxable turnover in respect of works contract under section 5C(1)(c)(ii) of the Kerala General Sales Tax Act, 1963.

Issue (i): whether a new claim for deduction of depreciation on machinery could be raised for the first time before the Tribunal in second appeal.

Analysis: The claim for depreciation had not been raised before the assessing authority or the first appellate authority and was introduced for the first time before the Tribunal as a fresh factual and legal claim. A Tribunal may entertain a new question of law arising from facts already found, but not a new claim requiring fresh facts to be investigated.

Conclusion: The new claim should not have been entertained for the first time in second appeal.

Issue (ii): whether depreciation on machinery and tools is deductible while computing taxable turnover in respect of works contract under section 5C(1)(c)(ii) of the Kerala General Sales Tax Act, 1963.

Analysis: The deduction provision allows amounts towards labour charges and other service charges, including charges for obtaining machinery and tools on hire or otherwise. That phrase was confined to expenditure actually incurred for obtaining machinery or tools under an arrangement other than hire, and did not extend to notional depreciation on owned machinery. Depreciation is a distinct allowance, and if intended, the Legislature would have expressly provided for it in the section.

Conclusion: Depreciation on machinery and tools is not deductible under section 5C(1)(c)(ii).

Final Conclusion: The Tribunal's order was set aside and the assessment as confirmed in first appeal stood restored, leaving the Revenue successful in the revision.

Ratio Decidendi: A deduction provision for works contract must be strictly construed, and depreciation on contractor-owned machinery is not covered by a clause allowing only charges incurred for obtaining machinery and tools on hire or otherwise unless the statute expressly provides for such depreciation.

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