Turnover exclusion for works contracts denied where tax was embedded in a consolidated contract price.

On a works contract quoted and received for a consolidated price inclusive of tax, the tax element could not be excluded from turnover under Explanation (1-A) to Section 2(r) of the Tamil Nadu General Sales Tax Act, 1959. Turnover was the aggregate contractual consideration, and exclusion was available only where tax was separately charged outside the price of the goods. Internal book entries or later apportionment of labour, materials and tax did not create a separate tax collection in the transaction itself. The Madras HC therefore upheld the Revenue's view and rejected the assessee's claim for exclusion.

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Issues: Whether, on a works contract executed for a consolidated amount inclusive of tax, the assessee could exclude the tax element from turnover by relying on entries in the books of account under Explanation (1-A) to Section 2(r) of the Tamil Nadu General Sales Tax Act, 1959.

Analysis: The definition of turnover under Section 2(r) covers the aggregate amount for which goods are sold or otherwise disposed of, and Explanation (1-A) permits exclusion only where tax is separately charged without being included in the price of the goods. The assessee had admittedly quoted and received a consolidated amount for the works contract, and there was no real bifurcation of labour, materials, and tax in the transaction itself. Mere adjusting entries or internal apportionment in the accounts could not convert an inclusive consolidated price into a separate tax collection for purposes of the statutory exclusion. The contract consideration, as agreed between the parties, constituted the turnover, and Section 3-B could not assist the assessee in claiming exclusion on the facts found.

Conclusion: The assessee was not entitled to exclusion of the tax element from turnover under Explanation (1-A) to Section 2(r), and the Revenue's view was upheld.

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