Works contract consideration includes linked crane hire charges where later agreement only facilitates completion of the same contract.

An additional payment made under a later agreement to speed completion of the same works contract was treated as part of the contractual consideration, not as a separate hiring arrangement. Because the later agreement was only an integral extension of the original undertaking, the amount paid for cranes and extra equipment remained connected with execution of the works contract. Accordingly, once composition was opted for, tax applied to the total consideration received for the contract, and the amount could not be excluded merely because it was separately described. The contrary view that it fell outside the works contract turnover was rejected.

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Issues: Whether the additional amount paid for compression of the erection period by hiring cranes and extra equipment formed part of the consideration for the works contract and was includible in the total turnover under the composition scheme under section 17(6) of the Karnataka Sales Tax Act, 1957.

Analysis: The second agreement was not treated as a separate and independent hiring arrangement. It was entered into to facilitate completion of the same works contract within a shorter period and was therefore part and parcel of the original contractual undertaking. The amount paid under the later agreement, though described as hire charges for cranes and equipment, was held to be consideration connected with execution of the works contract. Once the assessee had opted for composition under section 17(6), tax was payable on the total consideration received for the contract, and the additional amount could not be excluded merely because it was separately described. The Tribunal's view that the amount was outside section 5B and, therefore, outside section 17(6), was rejected.

Conclusion: The additional consideration was taxable as part of the works contract turnover and was rightly brought to tax under the composition scheme.

Ratio Decidendi: Where a later agreement is only an integral extension of an existing works contract and the additional payment is made for completing that contract, the amount forms part of the taxable contract consideration under the composition scheme and cannot be excluded as a separate hiring charge.

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