Gross profit deduction for labour and like charges remains available under works contract turnover computation.

Rule 6(4)(n) of the Karnataka Sales Tax Rules permits a standard deduction for labour and like charges in works contracts when actual expenditure is not ascertainable. Explanation II applies to clause (n) as a whole and requires apportionment of gross profit between goods and labour and other like charges in proportion to their respective components in the turnover. On that basis, gross profit attributable to labour and services remains separately deductible, and the revisional authority's disallowance of that deduction was not sustainable in law.

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Issues: Whether the revisional authority was justified in disallowing deduction of gross profit attributable to labour and like charges under Rule 6(4)(n) of the Karnataka Sales Tax Rules read with Explanation II.

Analysis: Section 5B of the Karnataka Sales Tax Act brings works contracts within the charging provision, while Section 2(u-1) and Rule 6 provide the mechanism for arriving at taxable turnover. Rule 6(4)(n)(v) permits a standard deduction towards labour and like charges where actual expenditure is not ascertainable. Explanation II, which applies to clauses (m) and (n) of sub-rule (4), mandates apportionment of gross profit between the value of goods and labour and other like charges in proportion to their constitution in the total turnover. The Court held that this explanation applies to Rule 6(4)(n) as a whole, including the standard-percentage deduction under clause (v), and that gross profit relatable to labour and services remains separately deductible. The revisional authority gave no adequate reason for ignoring this position and the applicable legal framework.

Conclusion: The disallowance of deduction of gross profit attributable to labour and like charges was not sustainable in law and the issue was decided in favour of the assessee.

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